ISLAMABAD: The federal government on Friday allowed National Bank of Pakistan (NBP) to remit $65 million for equity injection in its Bangladesh branch in order to fulfill minimum capital requirements after the bank’s equity eroded due to Rs13.9 billion in losses.
The decision was taken by the Economic Coordination Committee (ECC) of the Cabinet which also allowed the NBP to purchase dollars from the open market before remitting them in two tranches.
In the first phase, the bank will inject $44 million to meet the minimum capital requirements.
The NBP was moved to take the decision after the deputy governor of central bank of Bangladesh stated that the Pakistani bank was not fulfilling capital requirements.
The provision of $65 million worth of fresh funds to NBP, Bangladesh would rectify the capital shortfall, according to a handout issued by Ministry of Finance. NBP is expected to remit the amount by January 31, 2015.
The State Bank of Pakistan 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 has allowed NBP to inject fresh money into its ailing Bangladesh venture, it has not pressed the bank's management to recover the losses. The bank management too has not yet fixed responsibility for the loss on anyone.
Earlier in December, NBP President Iqbal Ashraf had admitted in front of a parliamentary committee that Rs13.9 billion losses were the result of 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 Bangladesh nationals had been hired by 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 actions 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 or collateral against the lending.
Hubco allowed tax exemption
The ECC decided on Friday to accord exemption from tax on profits and gains made by Hubco Power Company’s Hubco Narowal Power Plant, according to the finance ministry.
The Hubco power company has established a subsidiary and will 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.
The directions were issued after the minister witnessed non-implementations of the ECC decisions by the various government agencies.
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...and will those who are responsible for this loss be held accountable......or will this be another write off because big people are involved.