PAC requests Supreme Court to take notice of KASB merger

Committee chief says undue favours in merger deal has tainted SBP’s image

ISLAMABAD: The Public Accounts Committee (PAC) on Wednesday requested the Supreme Court to take suo motu notice of KASB Bank’s merger deal while terming it the biggest scandal in the central bank’s history that had also tainted its image.

The situation became tense during PAC proceedings as the Auditor General of Pakistan (AGP) started disclosing how the State Bank of Pakistan (SBP) gave favour to BankIslami while merging the defunct KASB Bank into it.

At one point, PAC Chairman Syed Khurseed Shah yelled at SBP Deputy Governor Jameel Ahmad for defending the deal.

“I request the Supreme Court of Pakistan to take suo motu notice of the KASB merger deal,” said the PAC chairman.

He also requested the National Accountability Bureau (NAB) chairman to make it an exemplary case as the matter was also pending before the bureau.

It is rare that parliament’s most powerful arm will request the apex court to take suo motu notice as politicians are against the use of such powers of the court.

Background

NAB had launched a probe into the KASB deal on the basis of a story published in The Express Tribune. In May 2015, the SBP amalgamated KASB Bank with BankIslami Pakistan Limited by invoking Section 47 of the Banking Companies Ordinance 1962 at a token price of Rs1,000.

The irregular amalgamation caused a loss of roughly Rs3.5 billion to the exchequer in addition to the loss of Rs6.6 billion to sponsors of the defunct bank, according to two separate reports of the AGP office. It was clearly a sweetheart deal for BankIslami as the SBP not only gave it an entire bank for Rs1,000, but also provided it with cash support of Rs20 billion, remarked Syed Naveed Qamar of the Pakistan Peoples Party. He termed the deal the biggest scandal in the whole history of the central bank.

The director general audit informed PAC that the central bank caused a loss of Rs3.5 billion to the exchequer by giving two loans totalling Rs20 billion at interest rates of 0.001% and 4.7%. “NAB has already declared the deal as non-transparent,” he said.

Finance Secretary Arif Ahmad Khan also sided with the PAC chairman. “The fact that the PAC chairman invited attention of the Supreme Court and NAB was sufficient to explain the whole issue,” said Khan when Senator Sherry Rehman taunted at the secretary for keeping mum.

For the first time, former finance minister Ishaq Dar’s name was also attached with the controversial deal. The deal was a setup by Dar, said Rehman while asking the SBP deputy governor “do not be more loyal to king than the king”.

The SBP deputy governor emphasised that the central bank did not favour BankIslami and the deal was finalised according to relevant laws. He claimed that the central bank had also given similar concessionary loans to other banks, but could not cite any such case.

“The undue favours given to BankIslami have now tainted the image of the central bank,” the PAC chairman said. Had a politician got a concessionary loan of Rs20 billion, NAB, the media and the SBP would have made him an example, he said.

The SBP’s director finance claimed that there was a Rs15-billion hole in the defunct KASB. However, PAC dismissed the argument, saying if there was a hole, there should have been a competitive process to sell KASB Bank. PAC is the fourth state institution that has found serious flaws in the amalgamation deal. Earlier, NAB, the AGP and the Sindh High Court had raised objections.

Last week, the SHC directed the SBP to share the external auditors’ report on KASB Bank’s valuation, which the central bank had kept confidential.

PAC also expressed its displeasure over the budgeting process of the finance ministry.

Published in The Express Tribune, April 26^th, 2018.

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