ZTBL’s bad loans jump to Rs71b

Govt attempts to restructure bank through ‘supra body’ of former bankers

ISLAMABAD:

Non-performing loans of Zarai Taraqiati Bank Limited (ZTBL) have jumped to Rs71 billion or 67% of its recoverable portfolio amid government’s attempts to restructure the bank through a “supra body” of former bankers.

A briefing by ZTBL President Shahbaz Jameel to the National Assembly Standing Committee on Finance on Wednesday revealed that the bank’s equity had turned negative by Rs19 billion by June this year.

Committee members expressed serious concern over the sequence and pace of ongoing restructuring of the bank amid a steep fall in both disbursements and recovery of loans.

ZTBL is in the red and the bank has almost stopped rolling over maturing loans at a time when the farming community needs financing the most due to locust attack.

Despite the glaring state of affairs, the Pakistan Tehreek-e-Insaf (PTI) government has failed to appoint the board of directors of ZTBL and instead constituted a three-member advisory committee of former bankers that does not have a legal standing.

Prime Minister Imran Khan constituted the supra body comprising Shaukat Tarin, Zubair Soomro and Atif Bokhari that was vetting every decision made by the ZTBL president. The government has not yet formed the ZTBL board despite repeated assurances.

“Without a board, we cannot move forward … my decisions are also vetted by the supra committee,” Jameel informed the NA committee.

However, he said the former bankers had been credited with restructuring HBL and UBL and their experience was benefiting him.

ZTBL is the country’s premier public-sector financial institution, which is responsible for meeting financing needs of the farming community.

Decisions that had to be taken by the board could not be taken by the president and “if you take these decisions, you will be held responsible for it,” said Faizullah Kamoka, Chairman of the NA Standing Committee on Finance.

The ZTBL president informed the committee that the bank’s non-performing loans increased to Rs70.94 billion by June this year against Rs57.1 billion a year ago. The Rs71-billion non-performing loans were equal to 66.7% of the Rs106.3 billion worth of recoverable portfolio, according to data shared with the standing committee.

The president said the Rs71-billion non-performing loans included Rs53 billion time-based classification and Rs17.7 billion was under subjective classification being done on the instructions of State Bank of Pakistan (SBP).

The bank had total equity of Rs52 billion that turned negative by Rs19 billion at the end of June 2020.

The bank’s annual operating losses that stood at Rs7.2 billion in June last year, increased to Rs8.3 billion in June this year, according to ZTBL. The bank made provisioning of Rs4 billion against the non-performing loans this year.

“We gave you ample time to bring changes in the bank and today you have not presented a plan that can bring improvement in the bank,” said Kamoka. “The only good thing that has been done so far is to remove people with tainted background,” he added.

“The ZTBL book was inflated and there was nothing inside due to adjustment of loans,” said the bank president. The numbers were misreported in the past, he added.

“The bank’s short and long-term objectives are not clear,” said Dr Ayesha Pasha of the Pakistan Muslim League-Nawaz (PML-N).

The committee chairman also decided to summon finance secretary and seek explanation from him over the undue delay in constituting the ZTBL board. In December last year, the finance ministry had promised to set up the board in two weeks.

The prime minister had also directed the finance ministry to complete the ZTBL board but it had not been done yet, said the bank president.

Jameel said the supra body was directly in touch with Finance Adviser Dr Abdul Hafeez Shaikh on the issue of constituting the board.

“The finance ministry had sent a summary to the SBP for ‘fit and proper’ test clearance of the proposed board members but the advisory committee got the nominations changed,” said Iftikhar Gilani, Joint Secretary of the Ministry of Finance.

Commenting on human resources of the bank, the president said there were about 2,500 surplus employees and so far “we have fired only those 58 people, including eight senior officers, who were either involved in wrongdoing or had fake degrees and experience certificates”.

All the 31 zonal heads would be replaced with people hired from the market within one year and 11 of them had already been replaced, he added.

The disbursement of loans by ZTBL to farmers that stood at Rs44.4 billion in June last year, dropped to Rs24.1 billion in June this year, a reduction of 45.6%. Similarly, the recovery of outstanding loans fell from Rs56.2 billion to Rs34.5 billion by the end of June 2020.

“Disbursements dropped due to the bank’s decision not to adjust the outstanding loans,” said Jameel.

“There is a strong perception in the market that you are going to privatise the bank and, therefore, not extending loans to farmers,” said Syed Samiul Hasan Gilani of the PTI.

“Privatisation is not on my agenda and I am reforming the bank,” said Jameel.

Published in The Express Tribune, July 9^th, 2020.

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