ISLAMABAD: The Federal Cabinet, which is scheduled to meet on Tuesday (today), is likely to approve the State Bank of Pakistan (SBP) amendments Bill, 2021, a prior action under the second to fifth staff review of IMF’s Extended Fund Facility Programme, sans nod of Cabinet Committee for Disposal of Legislative Cases (CCLC) as Finance Ministry wants the Bill to be introduced in Parliament urgently, well-informed sources told Business Recorder.
The State Bank of Pakistan (SBP) is incorporated under the State Bank of Pakistan Act, 1956, which gives the Bank the authority to function as the central bank of the country. The SBP Act mandates the Bank to regulate the monetary and credit system of Pakistan, and to foster growth in the best national interest with a view to securing monetary stability and fuller utilization of the country's productive resources.
The SBP Act Amendment Bill was drafted and forwarded by SBP to the Ministry of Finance (MoF) on March 11, 2020, which introduced certain changes and moved a summary for the Cabinet Committee for Disposal of Legislative Cases (CCLC). The Bill was very briefly considered by the CCLC on April 3, 2020.
Subsequently, the CCLC conveyed its decision which is as follows: "the CCLC deferred the consideration of the summary titled State Bank of Pakistan (Amendment) Bill, 2020 of March 27, 2020 submitted by Finance Division with the direction that after requisite deliberations a compromise (sic) draft may be submitted to CCLC on or before April, 10, 2020 for its consideration".
The reason for deferring the Bill was serious differences between the Ministry of Finance and Governor State Bank of Pakistan.
Accordingly, a “reconciled” draft of the Bill was prepared jointly by MoF and SBP and shared with the Law and Justice Division for legal vetting.
According to the Finance Ministry, submission of the amendments in the SBP Act, 1956 to the Parliament constitutes a 'prior action under the IMF programme 2019-22 for the upcoming Board meeting of the Fund, which needs to be completed without any delay. However, the CCLC may not be able to meet during the next fourteen days. Therefore, the Cabinet has been requested to: (i) waive, in consideration of the urgency, the condition of submitting the draft State Bank of Pakistan (Amendment) Bill, 2021 to the CCLC; and (ii) approve the Bill ibid for introduction in the Parliament in terms of Rule 16(1)(a) read with Rule 27 of the Rules of Business, 1973.’
According to the draft Bill, the authorized capital of the Bank shall be five hundred billion Rupees, divided into five billion shares of one hundred Rupees each. The authorized capital may be increased by the resolution of the Board, subject to the consent of the Federal Government.
The paid-up capital of the Bank shall be Rs 100 billion, divided into one billion shares of one hundred Rupees each, which shall be made up through issuance of bonus shares by capitalizing of profits or general reserve or through subscription of shares in cash by the Federal Government.
The capital shall be fully paid-up and held exclusively by the Federal Government and shall not be transferable to any other person or entity. The Board may, with the prior approval of the Federal
Government, increase the paid-up capital from time to time by a resolution, which shall be made up in the same manner as specified in sub-section (2). No reduction in either the authorized capital or paid- up capital shall be made at any time. The nominal value, issue price, the manner in which the new shares may be issued, their assignment to the register of shareholders shall be determined by the Board. Notwithstanding the amount of paid-up capital prescribed in sub-section (2), the paid-up capital and general reserves of the Bank shall increase to eight percent of its monetary liabilities through allocation from the distributable profit as determined in section 42.
(1)The Board, with the exception of the powers entrusted to the Monetary Policy Committee under Section 9D, shall perform the following functions, namely: - (a)define, approve and/or determine the general internal policies and rules of the Bank regarding the execution of its functions and approve internal rules for their implementation; (b)formulate and oversee foreign exchange reserve management, strategic investment and risk policy; (c) approve the annual budget of the Bank; (d) approve the annual report and financial statements of the Bank; (e)adopt and oversee the Bank’s policies on internal and external audit, compliance, internal controls and risk management; (f) adopt and oversee the system of financial reporting, accounting policies, information technology and security in the Bank; and (g)establish committees of the Board to assist in oversight functions.
The Bank shall not guarantee any loan, advance or investment entered into by the government, any government-owned entity or any other public entity. Provided that the existing outstanding debt- owned to the Bank in the form of loans, advances or government securities purchased on the primary market, at the time of the enactment of the SBP (Amendment) Act, 2021 shall be retired in accordance with the terms and conditions under which such outstanding debts were extended. In compliance with the prohibition of monetary financing under this section no roll-over or re-profiting of such existing outstanding debt of the governments owned to the Bank shall be permitted.
The guarantees issued by the Bank to secure the obligations of the government outstanding as at the date of the enactment of the SBP (Amendment) Act, 2021 shall not be increased, but can be rolled over in accordance with the terms and conditions under which such outstanding guarantees were issued.
The amount of overdraft outstanding against Pakistan Railways shall be converted into long-term debt with duration of eight years and remunerated at market interest rates. The clauses like 17 B regarding industrial credit fund will be omitted.
The Bank shall not extend any direct credits to or guarantee any obligations of the Government, or any government-owned entity or any other public entity.
The prohibition laid down in sub-section (1) shall not apply to government-owned or publicly-owned Banks and other regulated entities, which shall be given the same treatment as privately-owned banks.
The Bank shall not purchase securities issued by the Government or, any government-owned entity or any other public entity on the primary market. Nonetheless, the Bank may purchase such securities in the secondary market.
The Bank shall have the power to acquire, hold and dispose of moveable and immovable property of any kind, to enter into contracts and to undertake all activities necessary for the achievement of its objectives.
The Governor and the Finance Minister shall establish a close liaison with each other and shall keep each other fully informed on all matters which jointly concern the Bank and the Ministry of Finance.
The draft Bill further says “the Auditor General of Pakistan may, without prejudice to the autonomy of the Bank and the audits conducted by the external auditors pursuant to section 43, conduct audit of the accounts of the Bank. Such audit shall not have concern with the merits of the policy decisions including implementation by the Bank.”
The draft says, no suit, prosecution or any other legal proceeding including for damages shall lie against the Bank, Board of Directors or member thereof, Governor, Deputy Governors, member of any Board and Monetary Policy Committee, officers and employees of the Bank for any act of commission or omission done in exercise or performance of any functions, power or duty conferred or imposed by or under this Act upon such persons or any rules and regulations made thereunder or any legislation Administered by the Bank, including but not limited to the Banking Companies Ordinance 1962, Foreign
The Exchange Regulations Act, 1947, the Payment Systems and Electronic Fund Transfer Act, 2007, the Micro Finance Institutions Ordinance, 2001 or rules and regulation made thereunder, unless such act of commission or omission is proven beyond reasonable doubt to have been done in bad faith and with mala fide intent.
The Governor, Deputy Governors, Directors, members of any Board committee and Monetary Policy
Committee, officers and employees of the Bank shall not be liable in their personal capacity for any act of commission or omission done in their official capacity in good faith and in case of any such proceedings as they shall be indemnified by the Bank which shall bear all the expenses thereof, till the final decision of the case.
Notwithstanding anything contained in any other law for the time being in force, including the National Accountability Bureau (NAB), Ordinance, 1999 (XVIII of 1999) and the Federal Investigation Agency (FIA), Act 1974 (VIII of 1975) no action inquiry, investigation or proceedings shall be taken against any official of the Bank, by National Accountability Bureau or Federal Investigation Agency or Provincial Investigating Agency, bureau, authority or institution by whatever name called without prior consent of the Board of Directors. In case the Governor or a Deputy Governor is implicated in any such proceedings, they will recuse themselves from the meeting of the board at the time of deliberation of such matter.
The protection and indemnification provided in the sub-section (1), (2) and (3) shall mutatis mutandis apply to the former directors, Governors, Deputy Governors, members of any Board committee and monetary policy committee, officers and employees of the Bank for any act of commission or omission done during the service with the Bank".
Copyright Business Recorder, 2021