Looting of the Public Till
The main reason for nationalising the banks in 1974 was that credit was never available to the masses, it simply got circulated among the wealthy coterie of few families. Bhutto was absolutely correct in his premise and, to an extent, successful in spreading credit to a broad spectrum of aspirants. Nationalisation created its own inherent ills to go with its advantages. With the bureaucracy’s discovery of the potential of financial strength as a source of power, a new mixed elite of banking executives and financial bureaucrats came into existence, answerable to nobody. The result has been unbridled loot of the banks for the last decade or so that has surpassed standard corrupt practices of kickbacks and graft in the Third World by miles.
Control of the government media ensures that you can tar and feather whom you feel like with abandon. In this sweeping use of State powers the unfortunate backlash is that even Gospel Truth loses credibility. The same set of bankers exchange places with changes of government in a game of musical chairs, completely immune to accountability of any kind. The upsurge of banking excesses started around 1980, not in 1985 or 1988, by 1990 it was crafted into a perfect crime. We remember Dr. Mahbubul Haq pontificating in June 1988 about great changes in the banking system, to make it more responsive to the needs of the general public and then inducting some of the most notorious of the banking executives through the revolving door.
Between June and November 1988, accountability was repeatedly promised. Except for the odd politically tainted individuals, most senior banking executives not only survived, but have prospered since conniving in, even orchestrating, atrocious loot of the public till.
Almost without exception all the Presidents of the nationalised banks and the members of the Executive Board have been involved in the scam. Those who said “no” were simply transferred to the Pakistan Banking Council (PBC), e.g, the present President of UBL, Maqbool Soomro. Either you agreed to outrageous demands or were summarily treated. It can be said with pride that by emulating Mr Soomro some banking executives resisted political pressure at great professional and personal risk. Unless the collaborators (or Quislings) are dealt with, we will send wrong signals throughout the financial sector that crime does pay. Even in the Armed Forces where obedience is obligatory one can disobey an illegal command, certainly the bending of banking laws was criminal and this was quite apparent to banking industry. The guilty persons are likely to opt for the “Nuremberg defence” in that they were carrying out orders of the legally-elected government of the State.
However, this is precisely why they should be brought to task. As responsible officials it was their duty to refuse to do illegal bidding. If forced to do so, they should have recorded their dissent in writing for the attention of the concerned agencies, or if in a subordinate position, for their superiors.
Conscientious objection is not a new subject and the “Nuremberg defence” cuts no ice when it is revealed that most of the orders and instructions were issued on telephone, thereby making it hearsay evidence for legal purposes. The onus of proving telephonic instructions lies on the senior-most banking executives who took the calls. A deterrent to slavish compliance with telephonic instructions in the future will narrow accountability to those actually responsible. Some executives could have been terrorised into accepting illegal directives, most were willing collaborators who benefited individually, e.g. rumours (which may well be concocted) about Safdar Abbas Zaidi, ex-President Habib Bank Limited, whose son is alleged to have a Rs.500 million equivalent textile mill in Jebel Ali in Dubai.
For purposes of accountability, any debt over Rs.10 million which is (1) not being regularly serviced (2) was given without adhering to given procedures, (3) not having due collateral or (4) well-known to have been issued under political compulsions should be considered as a bad debt. A proforma should be established by each of the nationalised banks which would give (1) serial number and date (2) names of individuals, and/or corporate bodies, etc., including those who signed the promissory notes (3) amount of loan granted (4) securities offered/held against the advances (5) names of recommending banking officials, including the loan processing and sanctioning authorities (6) amount disbursed and manner thereof (7) amount recovered (8) amount of bad debt (9) whether any of the securities were encashed to adjust the bad debt (10) action taken to recover the bad debt (11) action against the persons responsible, if any, if not, why and (12) present appointments within the bank of the recommending, processing, sanctioning and recovery banking officials.
We were astounded to hear a senior industrialist entreating the Finance Minister, Mr Sartaj Aziz, during the lunch arranged at Karachi by the Pakistan Tanners Association (PTA) that the FIRs against two senior banking executives would demoralise the banking hierarchy. The Finance Minister should be judged from his effectiveness in bringing the corrupt banking executives to justice. Failure should result in his swift exit, the misuse of powers for personal gain and motive has been so blatant it defies description. One must caution, however, that there should be clear cases of felony, of misusing or exceeding one’s powers. Each successive government that comes to power talks about rejuvenating industry. We have many sick industries, how come we do not have any sick industrialists? The industrialists are seldom brought to task for their bad debts. One may hasten to add that business may indeed be bad and enforced debts can result but it would give us confidence in the system to see some businessmen/industrialists actually go down with their sinking ship, not a 100 per cent record of walking away financially unscathed, leaving the banks holding the bag. Some particular industrialists have made it a lucrative business to make industries sick. They live in palatial homes, have hefty individual bank accounts and live affluently, having looted their own industries at will, yet the system protects them.
Referring to The Nation’s article of April 03, 1990, titled “The Credit Squeeze (or Scam)” quote: “One of the most successful ploys adopted by this lot is to rope in those who matter in power, whether they are politicians or bureaucrats as willing collaborators. No sooner has a government come to power than these experienced sycophants start weaving their spider’s web, exhorting them to ask for credit, easily given. Even before the gullible go out of power, rumours are started by those who had encouraged them in the first place, about their “misdemeanours” and highhandedness in exacting credit on “dubious” pretences. Once out of power, they are vilified for their rapaciousness during their tenure in power, the real criminals escape justice year after year”. Many stories are current about a particular President of a Bank sitting every evening, drink in hand, at the feet of the power that once was!
What is happening now is exactly as predicted. It is important that we bring these recalcitrant bankers to justice. The worst offenders may have been identified because of their high profile. But there are others in the woodwork who were willing collaborators in the chain of hierarchy, no measure of credibility can be initiated unless the surgical scalpel is used more deeply. The senior banking hierarchy are not paid as well as they should really be, but they still are the richest class in the country on a pro-rata basis to the national wealth average, among both serving and retired personnel of all professions. The only source of their affluence can either be kickbacks or illegal advances for their own business. Unless we investigate the assets of the banking officials (enquiries being made by professional competent people), no amount of reform is going to succeed. A deterrence must be created. “Only by a complete rendering of accountability will we be able to stop the present total corruption in the nationalised banking sector. Maybe a private sector group can confidentially select certain banking officials for detailed scrutiny of their assets as a public service. Relying on data from a number of different sources, this group can publish a comprehensive report in the media, “The Nation”, April 03, 1990. By not moving against the banking mafia, successive governments have become guilty by association. Both sides have become willing collaborators in malfeasance for their own mutual convenience.
At this time less than 0.01 per cent of the privileged population takes up 90 per cent of the credit (other than that utilised by public sector or multi-national corporations), the balance 99.99 per cent has to fend for itself within the balance 10 per cent. To overcome this inherent shortage of credit, the small businessman, the salaried class, etc., are forced to turn to unscrupulous loan sharks (and a proliferation of spurious investment companies) at exorbitant interest rates, creating a life-long debt cycle. The banking system is open to exploitation by adventurers and brigands working with their willing collaborators among the senior banking employees.
To remedy this situation, certain steps are necessary. These are: (1) scrap the Pakistan Banking Council (PBC) (2) send all the Presidents and members of the nationalised banks into retirement, retaining only a handful among them who have not an iota of wrongdoing attached to their name (3) carry out complete accountability down to the level of senior Vice-Presidents. Those who go into retirement will not die of hunger, honourable exceptions aside. On the other hand, this punitive action will stop the looting of the nationalised banks, a public till. Unless accountability becomes a deterrent, we will have more of the same in the years to come.
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