ISLAMABAD, Nov 21: The Public Accounts Committee (PAC) has summoned the governor of the State Bank and president of the National Bank of Pakistan (NBP) to brief it on Wednesday about their policy of writing off loans.

The committee expressed concern over the fact that numerous influential defaulters were rescheduling and taking new loans from the financial institutions with impunity.

Finance Secretary Tanvir Ali Agha said continuous intervention of the government in the affairs of the public sector banks was responsible for the chronic problem, which must be checked to save the institutions from the onslaught of wilful defaulters.

PAC member Syed Qurban Ali Shah said the NBP had written off Rs18 billion loans to the owners of a tobacco company. It was not clear from the NBP’s list of defaulters whether they had got loans from the National Development Finance Corporation (NDFC), the Industrial Development Bank of Pakistan (IDBP) or some other institutions now merged into the NBP, he said.He alleged that the owners of the company had taken loans of billions of rupees in the name of their employees and fake companies in the 1980s and later refused to pay back the loans.

They were arrested by the National Accountability Bureau (NAB) and then released mysteriously after agreeing to pay Rs1.2 billion, he said.

“Nobody knows how much they owed to the NDFC and how much was written off or waived in settlement with NAB. The committee should summon all details in this regard,” he argued.

The committee presided over by Malik Allah Yar Khan directed the NBP to provide a detailed list of directors and companies of the Lakhanis with total amount outstanding against the companies.

Mr Shah accused a group of securing loans amounting to Rs4 billion, fleeing from the country and establishing business overseas.

He alleged that an industrialist got written off Rs1 billion and was doing business and enjoying full banking facilities.

The committee took serious notice of the NBP’s move of sanctioning a Rs410 million loan to a textile mill in 2000 in breech of procedure. The loan was provided by the NDFC.

“I wonder whether there is any law in this country to check defaulters and many industrial giants have been getting their loans written off over the past four years,” said member Rai Mansab Ali Khan.

Auditor-General of Pakistan Younas Khan, who was the finance secretary in 2000-1, said bank officials usually over-assessed the pledged assets and collaterals and that’s why banks never recovered anything in such cases.

Responding to a question, the finance secretary said that since 1972 -- the year of inception of the NDFC and the IDBP -- there had been continuous intervention from the government side, resulting in bad lending. He said the government realised the problems and that is why it had decided to give the banks to the private sector, which proved positive.

Manzoorul Haq, the official in charge of NDFC affairs in the NBP, claimed that all possible measures were being taken to recover the defaulted amounts. The NDFC had disbursed Rs160 billion during its operation and only eight per cent of the amount was stuck up, while international institutions accepted 15 per cent default as successful recovery.

On the Rs60 billion exchange losses, SBP officials said the government had to arrange currency swap and dollar purchase from the kerb and open markets in 2000-1.

During the same period, rupee registered historic depreciation of 22 per cent that increased the ratio of SBP losses.

Mr Agha said the decision to arrange swap and purchase dollars from open market had been taken after keeping all aspects in view to arrange debt services and import bills after restrictions were imposed on Pakistan in the wake of the 1998 nuclear tests.