Banks directed to write off loans of rice millers, traders

KARACHI: All commercial banks have been directed to write off the outstanding loans of rice millers and traders of flood-affected areas of Sindh and Balochistan in order to win the political support of the masses ahead of the upcoming polls.

The Economic Coordination Committee (ECC) of the Cabinet decided in a meeting held recently that 50 percent of the outstanding loans including mark-up of rice millers/traders should be picked up by the government for which necessary budgetary provision may be made.

The central bank, in this regard, directed the Allied Bank, Bank Alfalah, MCB Bank, National Bank of Pakistan, and Small and Medium Enterprises Bank to do the needful in line with the directives of the ECC.

The infrastructure, housing anbd SME Finance Department of State Bank issued a confidential letter No IM and SMEFD/Flood-Relief/Writee-off/12-141 dated Jan 26 to the said banks, seeking the positions of outstanding loans of rice millers and traders of flood-affected areas of Sindh and Balochistan.

The letter stated that the banks should ensure that only the affectees of the floods in 2010 will get benefits out of this dispensation and this process is to be monitored by SBP.

According to the said letter ECC also directed the finance secretary to look into the problems of small farmers with regard to their insured loans and take up the matter with concerned banks and insurance companies.

Industry sources believe that this is a novel way of influence the upcoming general elections and simply a way to give monetary benefit to the voters and political workers of the party.

However the real victims of the floods - farmers and low income class - would not be beneficial of this write-off rather comparatively high income class of millers and traders will get this relief from the government.

Industry demands the attention of the Write-Off Commission of the Supreme Court constituted in suo motu case regarding loan written-off cases since 1971 to 2010, while they said that the Chief Election Commissioner should also take notice of this pre-poll manipulation at the cost of banking sector.

The massive loans write-off will adversely impact banks balance sheet as increased the volume of already all-time high non-performing loans of the banking industry.

People in the banking industry suggest that the government should buy rice stock from millers and traders directly and make arrangement to export as this will increase the foreign exchange inflow. staff report