ISLAMABAD: Against the backdrop of a popular demand for a thorough probe into the Panama Papers leaks, the Supreme Court may reactivate an old case related to writing off of non-performing loans (NPLs) by commercial banks worth billions.

The court has asked 12 commercial banks to submit comprehensive reports showing the volume of loans waived off by them after 2009 since a three-man commission headed by Justice Syed Jamshed Ali Shah had already released its report regarding write-offs from 1971 to 2009.

A source privy to the development told Dawn that the case might be taken up again soon after Chief Jus­tice Anwar Zaheer Jamali returns from abroad on May 1. The court office has reissued notices to the Bank of Punjab and Bank of Khyber to submit their reports because all other banks have furnished the required data.

The apex court had initiated suo motu proceedings in 2008 on press reports that the State Bank of Pakistan quietly allowed commercial banks to write off NPLs under a scheme introduced by former president Pervez Musharraf.

Soon after the October 2002 elections, the then finance minister Shaukat Aziz and his financial team approved the loan write-off scheme and the SBP governor issued BPD Circular 29 of 2002.

Instead of launching an effective campaign for the recovery of NPLs, the SBP issued an incentive scheme to banks/DFIs (development finance institutions) in October 2002 for waiving NPLs of the organisations showing “loss” for three years.

The terms “waiving off loans” had surfaced in the terms of reference (ToRs) which the government issued soon after Prime Minister Nawaz Sharif in his address to the nation on April 22 had announced writing a letter to the chief justice to appoint a commission to investigate allegations made in the Panama Papers.

One of the ToRs for consideration of the commission was asking it to probe involvement of former and present holders of public offices in getting written off their own bank loans or those of their immediate family members through political influence and transfer from Pakistan of funds which have originated from corruption, commissions or kickbacks.

On Feb 20, 2013, the Supreme Court had ordered making public the report spread over 2,200 pages in three volumes compiled by one of its former judges Syed Jamshed Ali Shah as head of a three-man commission to investigate loan write-offs worth billions of rupees from 1971 to 2009.

According to the report, the total waived off loans over the past four decades stood at Rs87 billion, the major chunk of which is Rs84.621bn from 1992 to 2009 whereas it is Rs2.3bn from 1971 to 1991.

In its report the commission had regretted that it examined 740 cases, but despite its best efforts, banks and DFIs did not provide information on loans sanctioned or written off on “other than business considerations”, adding that either the bankers were afraid of politicians or civil/military bureaucracy, or were privy to sanctioning of loans or factually the quantum of such loans was not high.

Of the 740 cases, the commission had stated, a comparatively small number directly related to well-known politicians and civil or military bureaucrats. Though there were some prominent names here and there who availed write-off concessions, the number and quantum was not large enough.

The report said that because the written-off loans left a politician as a “defaulter” and could lead to his/her disqualification under Article 63 of the Constitution, they do take loans but prefer to have them restructured, thus the cycle continues.

The bankers verbally admitted, the report said, that influential gro­u­ps interfered at the “sanction” stage or write-off stage of loans in case of nationalised commercial banks.

The report admitted that shrewd and influential persons or businessmen actually do not avail the facility of larger write-offs. They get their loans restructured (without write-offs) and with those arrangements chunks of interest are capitalised and made part of principal amount of loans and the cycle continues. They, therefore, never become “defaulters”.

Published in Dawn, April 27th, 2016