Zarai Taraqiati Bank failed to recover Rs80.6 billion in bad loans, audit finds

The Auditor General of Pakistan (AGP) has found that Zarai Taraqiati Bank Limited (ZTBL) failed to recover Rs80.6 billion in non-performing loans and charged-off loans, pointing to weak loan appraisal, poor credit controls and ineffective recovery mechanisms.

According to the audit report for FY2024, the unrecovered amount includes Rs26.98 billion in non-performing loans and Rs53.08 billion in charged-off loans.

A charged-off loan is written off by a lender as a loss after prolonged non-payment, usually 180 days, though the borrower remains liable for repayment.

The audit said ZTBL’s loan infection ratio reached 44% when charged-off loans were included in the unrecovered portfolio. This means the bank failed to recover Rs44 out of every Rs100 disbursed, compared with the industry benchmark of 7.2%.

The report also highlighted 25,613 cases worth Rs8.382 billion in which no recovery was made during 2024.

The audit attributed the weak recovery position to poor credit appraisal and gaps in credit risk governance. It called for a detailed review of provisioning adequacy and recovery performance.

The report also said ZTBL has shifted towards an investment-driven profit model instead of focusing on its core function of agricultural lending.

According to the audit, 71% of the bank’s assets, or Rs414.616 billion, were invested in risk-free government securities, while advances remained stagnant at Rs109 billion.

Around 73% of ZTBL’s interest income, or Rs81.747 billion, came from investments, compared with Rs29.505 billion from core agricultural lending.

The audit observed that the bank had effectively prioritised lending to the government over lending to farmers.

The report further noted that ZTBL’s loan disbursement remained heavily concentrated in Punjab.

Five-year disbursement data from 2020 to 2024 showed that Punjab received Rs307.533 billion, accounting for 84.52% of total disbursements of Rs363.394 billion.

Sindh received Rs34.882 billion, or 9.59%, while Khyber Pakhtunkhwa and the erstwhile FATA received Rs14.564 billion, or 4%.

Balochistan received Rs1.656 billion, or 0.46%, while Azad Jammu and Kashmir and Gilgit-Baltistan received Rs5.227 billion, or 1.44%.

The audit said Punjab’s allocation was more than eight times the combined amount disbursed to the other four regions, raising concerns over equitable fiscal federalism.

Under the State Bank of Pakistan’s Agriculture Credit Expansion Plan, ZTBL had a lending target of Rs102 billion for 2024 but achieved only Rs72 billion, or 70%, in FY2024.

The audit also found that ZTBL management failed to implement a core banking system despite paying Rs24.75 million to an IT consultant aged 78 years. The consultant was appointed through a tailor-made advertisement in which the age limit had been omitted.