Centre to release Rs3b to Bank of Khyber

MD says cash injection will not only help meet MCR target, but also increase shares of provincial govt in the bank.

PESHAWAR: The federal government has agreed to release Rs3 billion to Khyber-Pakhtunkhwa for meeting the minimum capital requirement (MCR) of the Bank of Khyber (BOK).

Disclosing this, the bank’s managing director Bilal Mustafa said the cash injection will not only help meet the MCR target, it will also increase the shares of the provincial government in the bank.

The State Bank of Pakistan (SBP) has fixed the limit of MCR for all commercial banks. According to targets set by the central bank, the banks are required to achieve the MCR target of Rs7 billion by December 31, 2010 and Rs8 billion by December 31, 2011.

Similarly, the MCR targets for the years 2012 and 2013 have been fixed at Rs9 billion and Rs10 billion, respectively. The Bank of Khyber is lagging behind this target to the tune of Rs1.2 billion for the current year.

The provincial government holds 51 per cent share in the bank while the rest of the 49 per cent stake is in private hands.

For maintaining its share the provincial government is required to pay Rs1 billion every year to the bank. However, the provincial government has declined to bear the burden due to its own financial constraints. The bank has also asked the private shareholders to pay their share in proportion to the 49 per cent stake.

Just as the Punjab government has received Rs10 billion to meet the MCR requirement of the Bank of Punjab, the Khyber-Pakhtunkhwa should also be issued Rs3 billion to meet a similar condition for the Bank of Khyber, the bank’s managing director argued.

Published in The Express Tribune, November 5^th, 2010.