KARACHI, April 27: Banks should not enter into any agreement with the borrowers in the cases that have already been referred to National Accountability Bureau without first obtaining permission from NAB.

The Banking Policy Department of the State Bank has sent this advice to all banks and DFIs or development finance institutions through a letter issued on Monday. "It has been observed that some of the financial institutions after forwarding the cases of their wilful defaulters to NAB under section 31-D through SBP enter into agreements with the borrowers for settlement of outstanding liabilities without obtaining prior consent of the NAB," says the BPD letter No 12.

"This practice on the part of financial institutions renders the whole exercise futile." "It is, therefore, advised that financial institutions should not enter into any agreement with the borrowers in the cases which have already been referred to NAB by Governor SBP under section 31-D of NAB Ordinance without obtaining prior written permission/clearance from the NAB."

"With regard to cases which have been forwarded to SBP and are still in the process of referring the same to NAB, the financial institutions should first withdraw their such request/ cases from State Bank of Pakistan before entering into settlement agreements with borrowers."

The BPD letter warns that "the above instructions must be adhered to meticulously." Section 31-D of NAB reads as under: "...No inquiry, investigation or proceedings in respect of imprudent loans, defaulted loans or rescheduled loans shall be initiated or conducted by the National Accountability Bureau against any person, company or financial institutions without reference from Governor, State Bank of Pakistan."