ISLAMABAD: The Supreme Court was informed on Thursday that commercial banks continued to write off big loans even after the 2003 scheme allowing them to do so had expired and when the court was seized with the matter.

A three-judge bench comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Muhammad Sair Ali and Justice Ghulam Rabbani was surprised to know that the banks had written off loans of billions of rupees over the past two years even after the expiry of Circular 29 issued by the Shaukat Aziz government in 2003 under Section 33B of the Banking Companies Ordinance 1962.

The court has taken notice of media reports that the State Bank had quietly allowed commercial banks to write off non-performing loans of Rs54 billion under a scheme introduced by former president Pervez Musharraf. The amount swelled to Rs256 billion after the scope of scrutiny of such loans was extended to Dec 2009.

The court asked Advocate Syed Iqbal Haider, the counsel for the State Bank, to get information from the quarters concerned and satisfy it how the banks were allowed to write off loans.

“It has become a culture in the country that loan beneficiaries never bothered to return the public money. People are not as clean as they claim,” the chief justice observed.

The court said that mill owners had been multiplying their businesses after getting their loans written off.

“Ask the SBP governor to withdraw the Circular 29 and let the commission decide the cases. If it is discovered that the loans were waived genuinely, we are with you,” the chief justice said while pointing to Iqbal Haider.

The court was referring to a three-member special committee formed to look into the matter.

The court said bank officers involved in extending loans without adhering to rules should be proceeded against.  The court observed that none of the beneficiaries had ever come forward to defend himself despite knowing well that the court had been hearing the cases for a long time.

Iqbal Haider said no efforts had been made by the SBP to defend the wrong, but the cases required to be differentiated from those which were done under political influence.

He said the commission had already scrutinised 100 cases, adding that the Circular 29 lapsed in Oct 2003 and people who had applied for loan write-offs took their cases to courts. The litigation continued till 2005 and many litigants got decisions in their favour.

The court will take up on May 30 cases relating to loans of billions of rupees of politicians and big business concerns which were written off under the scheme introduced by then finance minister Shaukat Aziz and his financial team soon after the Oct 2002 election.

Instead of launching an effective campaign to recover non-performing loans, the SBP introduced an incentive scheme for banks and DFIs in October 2002 called BPD (Circular)-29 to write off loans after succumbing to the pressure of certain top politicians of the then ruling party to ease out financial burden on their business concerns.