ISLAMABAD, Feb 20: The Supreme Court made public on Wednesday a report of a three-member commission formed to investigate billions of rupees of loans written off over the past four decades.

A three-judge bench comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Khilji Arif Hussain and Justice Sheikh Azmat Saeed had taken notice of media reports that the State Bank had quietly allowed commercial banks to write off non-performing loans estimated at Rs54 billion under a scheme introduced by former president Pervez Musharraf.

The estimate swelled to Rs256 billion after the scope of scrutiny of written off loans was extended to Dec 2009 from 1971.

A circular issued by the SBP governor had also raised serious questions with respect to the written off, remitted, reversed or waived loans/advances from 1971 onward under BPD circular 29 of 2002. Under the order, banks waived loans given out of public money during the Musharraf regime.

Soon after the Oct 2002 general election, then finance minister Shaukat Aziz and his financial team at the SBP had approved the loan write-off scheme to ease financial burden on business concerns owned by some leaders of the ruling party of that time.

Instead of launching an effective campaign to recover non-performing loans (NPL), the SBP had in Oct 2002 issued an incentive scheme to banks and DFIs to waive loans of organisations showing ‘loss’ for three years or more after dividing them into three categories — (A) NPL up to Rs0.5 million; (B) NPL from Rs0.5m to Rs2.5m and (C) more than Rs2.5m.

According to media reports, politicians and big business concerns used the third category (C) to get billions of rupees outstanding against them written off by banks. Shockingly, banks and DFIs were asked to recover maximum possible amount to settle loans falling under categories B and C through forced sale of available assets. The purpose of the scheme was to clean the balance sheets owned by banks and DFIs.

The three-member commission constituted under the Banking Companies Ordinance, 1962, was headed by a former SC judge, Justice (retd) Syed Jamshed Ali Shah. Its terms of reference included penalising bankers who had waived loans without any justification.

The commission had to hold bankers responsible for extending short-term or long-term loan facility to borrowers on inadequate securities and to recommend steps to be taken against them. It had to suggest measures to safeguard the amount of loans against arbitrary concessions extended in the past either on political or other considerations.

On Wednesday, the voluminous report in 20 iron boxes was unsealed in the open court and three sets of volume I to II, along with a supplementary paper book, were taken out for perusal of the judges.

The court ordered that the report be provided to the counsel representing the banks and also made it available for inspection by all and sundry to be regulated by the court office.

The court ordered that the rest of the volumes of the report be kept again in the sealed boxes in safe custody. The case will be taken up after three weeks.