ISLAMABAD:
The federal government has allowed the National Bank of Pakistan (NBP) to remit $65 million for equity injection in its Bangladesh branch, with an aim of fulfilling minimum capital requirements after the bank’s equity eroded due to losses amounting to Rs13.9 billion.
The decision was taken by the Economic Coordination Committee (ECC) of the cabinet that allowed the NBP to purchase dollars from the open market and remit in two tranches. In the first phase, the NBP will inject $44 million to meet the minimum capital requirements.
The ECC move came after the Bangladesh central bank’s deputy governor stated that the Pakistani bank was not fulfilling the capital requirement. The Bangladeshi government has been creating hurdles and even levelled spying allegations against one of the senior officials.
The provision of $65 million worth of fresh funds would rectify the capital shortfall, according to a handout issued by the Ministry of Finance. The amount will be remitted by NBP till January 31.
The State Bank evaluated the proposal and recommended that NBP may be allowed to remit $65 million to NBP, Bangladesh from interbank market against regulatory capital shortfall of NBP, Bangladesh operations due to operating losses.
While the government allows the NBP to put fresh money, it has not shown its seriousness to force the management to recover the losses. The NBP’s Bangladesh branch has sustained Rs13.9 billion losses due to corrupt practices of the NBP staff. The bank management has not fixed responsibility so far.
Early this month, NBP President Iqbal Ashraf had admitted in front of a parliamentary committee that Rs13.9 billion losses were a result of a complete breakdown of command and control in the NBP.
He had vowed to take action against all responsible officials including initiating criminal proceedings against seven Bangladeshi nationals. The Bangladeshi nationals were hired by the NBP to run local operations.
Ashraf had stated that Rs15 billion loan portfolio was engineered to default from day one. He stated the regional head and the head office did not take prompt action to rectify the situation.
According to findings of an audit firm, hired to fix responsibility of losses, the bank management issued facility letters to the borrowers without taking credit reports from the Bangladeshi regulators. The loans were issued without visiting premises, getting legal opinion and audited financial statements. The responsible NBP officials did not seek insurance and collaterals against the huge lending.
The ECC also gave exemption from tax on profits and gains made by Hubco Power Company’s Hubco Narowal Power Plant, according to the finance ministry. The Hubco has established a subsidiary and would transfer all assets and liabilities related to the Narowal plant to the new company aimed at claiming the tax exemptions.
During the meeting, Finance Minister Ishaq Dar directed secretary cabinet to form a monitoring cell to pursue the status of implementation of all ECC decisions. He gave the directions after witnessing declining trends of implementation on the ECC decisions by the various government agencies.
Published in The Express Tribune, December 20th, 2014.
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$65 million loss from one overseas branch! What value is that branch bringing to NBP to justify leaking 65M and trying to keep it open? I say shut it down now. Put 65M into counter terrorism or in improving the well being of stranded Pakistanis.