Executives at the Bank of Punjab allegedly signed off on lending as much as Rs52 billion without adequate documentation and insufficient collateral, causing the financial institution to teeter on the verge of bankruptcy before being bailed out by the Punjab government.
A joint investigation team headed by Aftab Sultan, a senior official of the Punjab police, has been looking into allegations of corrupt lending at the Bank of Punjab after a scandal involving fraudulent loans worth Rs8.4 billion to Haris Steel Mills led to the bank facing severe financial difficulties in late 2008. The bank ended up needing a bailout of R10 billion from the Punjab government, its largest shareholder, in early 2009.
The senior management team of the Bank of Punjab (BoP) was replaced completely and former president Hamesh Khan was extradited from the United States to face charges of violating banking regulations after he had earlier resigned and left the country. The largest shareholders of Haris Steel Mills, Sheikh Afzal and his son Haris Afzal, were extradited from Malaysia to face charges of defrauding the bank.
The current management team of the BoP has been cooperating with investigators and it was they who pointed out the list of 733 loans worth over Rs52 billion that had been given out in violation of banking regulations on documentation and collateral.
The bank’s current president, Naeemuddin Khan, told The Express Tribune that the bank was suing those 733 borrowers and had cases pending against all of them. He claimed that the management had so far succeeded in restructuring nearly 87 per cent of those loans, including Rs18 billion that the bank had already received in payments towards those debts.
Officials at the National Accountability Bureau (NAB) say that Rs7 billion has been recovered from Haris Steel Mills and its principal shareholders, Sheikh Afzal and his family. The Supreme Court has authorised law enforcement agencies to seize the family’s assets and sell them off until the amount that is owed to the bank is repaid. It is not immediately clear if the properties being sold off, including some in Malaysia and the United Arab Emirates, had originally been pledged as collaterals against the Rs8.4 billion loan that the company defaulted on.
The Bank of Punjab’s president, however, cited a lower figure for the amount recovered from Haris Steel and its principals, saying that Rs1.5 billion had been paid back. He did, however, state that he would personally be flying to Dubai and Malaysia to sell off the Sheikh family’s assets in order to recover the amount they owe the bank.
Haris Steel Mills had borrowed up to Rs8.4 billion from the Bank of Punjab in 2008 while not providing adequate collateral. It is alleged that the bank’s senior management, including Hamesh Khan, had allowed the company to skirt normal regulations on borrowing limits by voting to approve multiple loan requests of smaller sizes. Hamesh Khan denies all charges of wrongdoing.
Published in The Express Tribune, March 8th, 2011.
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