November 23, 2006	Thursday	Ziqa'ad 1, 1427

ISLAMABAD, Nov 22: President of Zari Taraqqiati Bank (ZTBL) R A Chughtai on Wednesday admitted that corruption, nepotism and an ageing batch of officers had plagued the bank, which wrote off over Rs4 billion loans to 101 industrialists only under circular No. 29 of the State Bank of Pakistan (SBP).

The bank’s financial health is quite serious and has suffered Rs5.164 billion losses from June 2004 to June 2006.

“No body can deny corruption in ZTBL. It is an open secret. It’s a reality that the bank is in financial crisis… Our loans recovery rate in Sindh and Balochistan is almost zero,” Mr Chughtai observed while briefing the Public Accounts Committee (PAC) here at the Parliament House.

The committee directed the ZTBL president to provide the list of 101 industrialists, who had deprived the bank of such a huge amount under fake agro-based projects. A good number of these defaulters belong to the top 50 richest families of Pakistan.

Under the SBP circular of October 2002, ZTBL has written off Rs4.460 billion irrecoverable loans to 11,964 defaulters. But a bigger chunk of this amount--Rs4.018 billion--went to industrialists. Some 11,863 small farmers were written off only a peanut share of Rs400 million.

The ZTBL president said that 35 per cent of the bank’s 1,311 mobile credit officers (MCOs) were above the age of 45 years. They were unable to perform their duties on motorbikes. And, above all, their mindset could not be changed and performance improved at this stage.

“How can I preach sincerity and honesty to these officers at this stage? This is like talking to a wall. Can anyone reform those officers, who have internalised corruption at such an age?” he asked while replying to a question by a member Qurban Ali Shah.

Mr Shah had remarked that the ZTBL chief was helpless to transfer or fire corrupt officers from lucrative stations, where they were busy in taking 10 per cent commission on farm loans from the borrowers for decades and were now billionaires. In India, CBI had investigated many such MCOs who had made billions, but in Pakistan no one cared, he added.

Mr Chughtai said that once he tried to transfer 200 bad performing officers, but faced tough pressure from the influential people in the power corridor. “If I tell you the names of these influential people, you will be baffled,” he observed.

He said the absence of technology in the bank was one of the main reasons behind its poor performance as the bank’s MCOs worked manually.

“But, you have been using Land Cruisers for the past one _

year. Can you please tell us what is your own performance during the last one year?” Qurban Ali Shah asked the ZTBL president, who then started discussing technical jargons instead of answering.

The PAC also warned the ZTBL president to refrain from increasing the percentage of interest on loans from the existing 8 per cent. Otherwise, it would increase the burden of non-performing loans on small farmers and would have disastrous effects on the already crippling agriculture sector.

Mr Chughtai was of the view that when the government decreased interest rate on loans from 14 per cent to 8 per cent in 2004, ZTBL’s pre-tax profit was Rs1.7 billion. However, next year—2005--the bank not only suffered Rs87 million losses, but also inflicted Rs3 billion losses on the State Bank of Pakistan (SBP). ZTBL pays 6 per cent share to the SBP from its profit. And, when the bank was in losses, it meant there was nothing to be offered to the SBP.

However, some members of the committee observed that during Zia’s time the bank was performing well despite the fact that it provided interest-free loans to farmers and the farming sector also bloomed.

They said that there were many countries where the rate of interest on farm credits were less than 5 per cent and the banks were still in a better financial health. The issues were corruption and dishonesty and not the low interest rate.

They said the ZTBL had already diverted from its traditional role of an agricultural development bank and had become a toy in the hands of industrialists.

The committee directed the ZTBL president to try to reduce the over Rs2.5billion annual operational cost--which goes to salaries of the staff of the bank and stop writing off loans to industrialists to get out of the crisis.

It also asked the bank to arrange credit cards for farmers to save their time and allow them to buy seeds, fertilisers, pesticides etc on their own choice instead from the bank’s agents, who often sold substandard items.

The committee was informed that the bank had paid Rs21.698 billion in remissions announced by the government from time to time since 1992 to 2005. If ZTBL had to give remissions to other defaulters in various areas--Tharparkar, Zhob, Balochistan and the earthquake hit areas--as announced by the government recently, it had to pay an additional Rs11.7 billion.

Mr Chughtai said that the government had to pay the remissions from its own kitty in order to save the bank from financial collapse.

He said the announcement of remissions of loans had badly impacted the recovery rate of the bank. In Sindh and Balochistan, the recovery rate was zero. In the earthquake-hit areas and Northern Areas the results of the announcement was also bad. In fact, people sat and waited for remissions instead of paying back their loans.