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PuTTY doesn't currently support the remote-to-local direction of dynamic port forwarding, i.e. opening a listening port on the SSH server which functions as a SOCKS server, and responds to requests by making network connections on the client side.
This wouldn't be too difficult to implement in principle. The PuTTY code base already contains all the necessary pieces.
What worries me about it is that there are surely a lot of use cases that don't really want to expose all of the SSH client's local network to the SSH server. SSH servers are often multiuser machines, and a client user's LAN is likely to contain all kinds of poorly secured internal services, and probably in many cases you didn't really want to give all the other users on the server machine access to all those insecure endpoints. So I feel as if, for many uses of this kind of feature, you'd want some kind of passlist/blocklist system that lets you configure what destinations the SOCKS server is willing to let its clients connect to.
That's not too hard in implementation terms, but it's a lot of design effort, because there are so many ways you might want to specify individual passlist/blocklist entries or ranges of them:
So when I've thought about this in the past I've tended to feel that a more flexible solution is to run a separate SOCKS server on the client machine, and point an ordinary remote port forwarding at that. A dedicated SOCKS server program is likely to have some kind of configuration system already for this kind of thing, so PuTTY wouldn't have to make up its own from scratch. And there would be nothing tying this solution to a particular SOCKS server – you'd be free to use whatever SOCKS server you liked the feature set of best, instead of being constrained to use only the provided one with its limited range of configuration.
(Of course, you could have made the same argument about the existing local-to-remote dynamic forwarding! In the most typical use case of SSH, running a login session on a remote Unix machine where you have a full-featured shell account that can run programs of your choice, there's no reason you couldn't implement that forwarding mode in exactly the same way, by running a SOCKS server on the remote machine and forwarding an ordinary port to it. But the difference is that if you're not in that most typical use case of SSH – e.g. because your access to the server machine is locked down, or perhaps it's a special-purpose device in the first place which can't run arbitrary programs – then you may not have the freedom to run a SOCKS server remotely. So, in that case, local dynamic forwarding really is giving you something you couldn't achieve any other way. Whereas if you're able to run PuTTY on your client machine then you're probably also able to run a SOCKS server on the same machine.)
(The latest PuTTY source code does have the ability to build a very simple standalone SOCKS server, 'psocks'. This is built from bits that were lying around in PuTTY anyway, so it doesn't have any of the configurability discussed above.)