State Bank of Pakistan Governor Shahid H Kardar on Tuesday said the Punjab government needs to inject some liquidity into Bank of Punjab to improve its financial health. Briefing the Senate Standing Committee on Finance here on the state of economy, Kardar said the SBP has already provided Rs 10 billion equity to BoP.
We are in discussions with the Punjab government to address some issues pertaining to the bank. The BoP is a good franchise, he added. "The SBP sees no reason why it could not be revived," he said, adding that the bank is still a good franchise. Kardar said that the bank is yet to publish its annual statement. Another official of the central bank informed the committee that Crescent Investment Bank has also borrowed some money from BoP but cannot give an exact figure.
The SBP official informed the committee that it is the SBP which identified some issues in BoP and upon SBP's initial findings a formal enquiry was launched which resulted in intervention of National Accountability Bureau and Federal Investigation Agency in the affairs. He strongly defended the monitoring and surveillance of the SBP in the banking sector.
Chairman of the Committee, Ahmed Ali asked Kardar to submit report on BoP to the committee after a member questioned as to how Rs 9 billion embezzlement scam was unearthed while it was under strict monitoring of the central bank. The committee taking up the issue of amalgamation of National Development Finance Corporation (NDFC) with National Bank of Pakistan (NBP) directed the latter to submit detailed report in the next meeting.
The Secretary Finance said NDFC was a statutory body established under its own law and it was decided to merge it with NBP because of its deteriorating financial condition. The SBP was authorised under the banking companies ordinance to merge the NDFC into the SBP on the directives of finance ministry. The SBP Governor said at the time of merger there were individual depositors of Rs 28 billion and it was important for the central bank to protect their deposits.
Another official of the central bank added that there were three options with the SBP to deal with the issue of NDFC. The first option was to go for rehabilitation of NDFC, which required Rs 21 billion cash injection. This was not considered a viable option given the record of the NDFC. The second option was liquidation that would have damaged the deposits of the individuals. The SBP decided to go for best available options for merger of the NDFC with a financially strong institution, NBP, at a cost of Rs 3.7 billion.
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