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CIRC in a dilemma to recover Rs23.54b defaulted loans

LAHORE: Corporate and Industrial Restructuring Corporation (CIRC) often accused by the businessmen of recovering a fraction of defaulted amount from public auction of industrial units is facing a dilemma to recover even a penny asset-less defaulted loans worth Rs 23.545 billion.

Sources in CIRC informed NNI that the corporation was forced to acquire 38 defaulted units from the banks that have no asset what so ever.

They said 28 UBL units with default worth Rs22.5 billion were thrust upon CIRC because the government wanted to clear the balance sheet of the bank before privatisation. Similarly, 10 NDFC units with a defaulted amount of Rs1.045 billion were handed over to CIRC when it was the NDFC was merged with NBP.

They said though CIRC is making all efforts to recover the amount but it looks likely that these units would be handed back to the government when the Sunset Clause of CIRC is applicable in another two years.

Sources disclosed that the corporation has acquired services of two asset-tracking agencies that are trying to locate property or asset belonging to the sponsors of these defaulted units.

They said the CIRC would then get these properties attached through courts so that some recovery of the defaulted amount could be made. So far, according to these sources no significant success has been achieved in this regard.

They expressed surprise as to why the banks kept these loans in their books when there was no collateral or asset available against them. According to banking norms these should have been written off they added.

A CIRC official also explained the reason for low recovery of defaulted amounts through auction by CIRC. He said most of the units handed over to CIRC were in default for over a decade. He said the banks were not able to recover a single penny from these units during this period. He said most of the loans were provided on political reasons as favours.

He said sponsors siphoned off the major chunk of loan at the time of import of machinery. As a matter of fact, he added, these units when installed were worth less than 50 per cent or even less than the loan value. Some units, he added, never became operational. He said the units lost value with the passage of time.

He said they were handed over to CIRC after all possibilities to recover even a nominal amount were exhausted.

He said CIRC evaluated the recent market value of these units and auctioned them keeping the realistic price in mind. He said the chapter of recovery has not been closed after auction of these units.

He said the asset-tracking agencies are also tracing the assets of the sponsors of these units. He said they have achieved some success in this regard. He said around 50 properties have been identified that belong to the directors of the units acquired by the CIRC.

He said that in some cases these properties have been attached while efforts are being made to attach the remaining properties through court orders.

It was learnt that some of those defaulted sponsors whose properties have been attached by CIRC are approaching the corporation to enter in a deal whereby they agree to pay some amount. CIRC however, is facing the dilemma that the corporation itself has got no mandate to enter into any bargaining. It is up to the CIRC board to allow the corporation to do so. It was further revealed that CIRC board is not complete.

The CIRC in fact remained without a chairman ever since Musharraf Cabinet resigned after October elections. According to CIRC ordinance the federal finance minister would be its chairman. There was no finance minister in Jamali government till Shaukat Aziz took oath recently.

The post of one board member of CIRC remains vacant since Moeen Afzal retired as Secretary General Finance. The CIRC ordinance specifically states that Secretary General Finance would be member of its board of directors. Currently there is no Secretary General Finance in the federal government.

The affairs of CIRC and its progress towards recoveries would remain hampered until the CIRC board is completed and meets to approve proposals for recovery of loans from the attached property of sponsors of defaulted unites. In-charge and other officials of commerce ministry.

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	CIRC in a dilemma to recover Rs23.54b defaulted loans LAHORE: Corporate and Industrial Restructuring Corporation (CIRC) often accused by the businessmen of recovering a fraction of defaulted amount from public auction of industrial units is facing a dilemma to recover even a penny asset-less defaulted loans worth Rs 23.545 billion. Sources in CIRC informed NNI that the corporation was forced to acquire 38 defaulted units from the banks that have no asset what so ever. They said 28 UBL units with default worth Rs22.5 billion were thrust upon CIRC because the government wanted to clear the balance sheet of the bank before privatisation. Similarly, 10 NDFC units with a defaulted amount of Rs1.045 billion were handed over to CIRC when it was the NDFC was merged with NBP. They said though CIRC is making all efforts to recover the amount but it looks likely that these units would be handed back to the government when the Sunset Clause of CIRC is applicable in another two years. Sources disclosed that the corporation has acquired services of two asset-tracking agencies that are trying to locate property or asset belonging to the sponsors of these defaulted units. They said the CIRC would then get these properties attached through courts so that some recovery of the defaulted amount could be made. So far, according to these sources no significant success has been achieved in this regard. They expressed surprise as to why the banks kept these loans in their books when there was no collateral or asset available against them. According to banking norms these should have been written off they added. A CIRC official also explained the reason for low recovery of defaulted amounts through auction by CIRC. He said most of the units handed over to CIRC were in default for over a decade. He said the banks were not able to recover a single penny from these units during this period. He said most of the loans were provided on political reasons as favours. He said sponsors siphoned off the major chunk of loan at the time of import of machinery. As a matter of fact, he added, these units when installed were worth less than 50 per cent or even less than the loan value. Some units, he added, never became operational. He said the units lost value with the passage of time. He said they were handed over to CIRC after all possibilities to recover even a nominal amount were exhausted. He said CIRC evaluated the recent market value of these units and auctioned them keeping the realistic price in mind. He said the chapter of recovery has not been closed after auction of these units. He said the asset-tracking agencies are also tracing the assets of the sponsors of these units. He said they have achieved some success in this regard. He said around 50 properties have been identified that belong to the directors of the units acquired by the CIRC. He said that in some cases these properties have been attached while efforts are being made to attach the remaining properties through court orders. It was learnt that some of those defaulted sponsors whose properties have been attached by CIRC are approaching the corporation to enter in a deal whereby they agree to pay some amount. CIRC however, is facing the dilemma that the corporation itself has got no mandate to enter into any bargaining. It is up to the CIRC board to allow the corporation to do so. It was further revealed that CIRC board is not complete. The CIRC in fact remained without a chairman ever since Musharraf Cabinet resigned after October elections. According to CIRC ordinance the federal finance minister would be its chairman. There was no finance minister in Jamali government till Shaukat Aziz took oath recently. The post of one board member of CIRC remains vacant since Moeen Afzal retired as Secretary General Finance. The CIRC ordinance specifically states that Secretary General Finance would be member of its board of directors. Currently there is no Secretary General Finance in the federal government. The affairs of CIRC and its progress towards recoveries would remain hampered until the CIRC board is completed and meets to approve proposals for recovery of loans from the attached property of sponsors of defaulted unites. In-charge and other officials of commerce ministry.
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