LAHORE, June 28: A division bench of the Lahore High Court has held that the State Bank of Pakistan is in no way authorized to issue directions to banks to give information about the accounts of individual citizens to any other institution, whether a government department or not.

The bench observed that by issuing a circular to banks on June 30, 2003, to seek the classified information about depositors, the SBP had stepped into a legal domain which was forbidden under the Banking Companies Ordinance, 1962.

The high court’s verdict, released on Tuesday, is the explanation of its short order issued on May 26 through which it dismissed in limine an intra-court appeal of the SBP declaring that its circular was unlawful. The bank had appealed against the judgment of a single bench through which it declared the SBP direction illegal.

The petition against the SBP direction was filed by Advocate M. D. Tahir who submitted that an individual’s bank account was a sacred trust and no bank was authorized to give information about it even for the benefit of the government.

The petitioner had challenged the circular which sought classified information about depositors whose annual profit was Rs10,000 or more.

The SBP submitted that it was requiring the information for the Central Board of Revenue (CBR) to enable it to streamline the tax collecting system and bring more people into the tax net. It contended that the circular was issued in the ‘best public interest’ and it was authorized to obtain information which help improve revenue collections.

The court held that the SBP was under a legal obligation to issue directions to banking companies only to help and guide them improve their working and safeguard the interest of depositors.

The circulars, according to the seven-page judgment, would be lawful if they were issued to lay down uniform banking policy which conformed with the preamble and aims and objectives of the Banking Companies Ordinance.

As for the expression ‘public interest’, the judgment said it could not be extended to serve the objectives alien to the provisions of the ordinance whose preamble and objectives did not stipulate an authority to the SBP to secure information for another institution.