ISLAMABAD: Finance Division has given its concurrence to allow SME Bank to utilise available surplus funds and expected proceeds to initiate settlement of its employees’ obligations.

Sources said that SME Bank, which was established through amalgamation of Regional Development Finance Corporation (RDFC) and Small Business Finance Corporation (SBFC) in 2002 having 93.89% shares of the government aimed to cater to the financing needs of the SMEs to help stimulate SME development and pro-poor growth in the country.

The bank inherited outstanding loans of Rs 14 billion and 1133 employees from defunct RDFC and SBFC in 2005 and was granted commercial backing license by the SBP. The privatisation process of the bank was started in the year 2008, which remained unsuccessful and second and third attempts in December 2015 and October 2018 also failed due to lack of interest of investors.

Clearance of SME Bank depositors’ liabilities: Rs5.557bn savings from closed ADB FMGP project loan to be used

Subsequently, the SME Bank was delisted from the privatization programme by the Cabinet Committee on Privatisation (CCoP) in 2022 on the grounds that the SME Bank was incurring losses with severe liquidity issues and required immediate government intervention to avoid its imminent default.

Additionally, no bank had shown interest in acquiring SME Bank or in its merger. Therefore, it was delisted it from the privatisation programme.

The federal cabinet in March 2003 had approved the action plan for winding down of SME bank and release of funds Rs 5.552 billion avertable as savings in ADB’s Financial Markets and Governance Programme (FMGP) loan account to pay off the SME Bank’s depositors as recommended by the State Bank of Pakistan (SBP).

Tahir Hussain Quereshi has been appointed as President/ CEO SML Bank for a period of three months by the caretaker government on 09-08-2023 who will be appointed as official liquidator at an appropriate time whereas details of the board comprising two independent directors and four ex officio members.

The second-phase to close branches is in progress and out of 13 branches and 2 Special Asset Management (SAM) offices, 4 branches have been closed/ merged. Four branches and one SAM office are in the process of closure. In order to gradually reduce the operational cost, steps are under way on continuous basis included ;(i) cancellation of branches/ offices rent agreements; (ii) disconnection of all utilities service and IT connectivity; (iii) rationalization of outsourced staff; (iv) instructions issued to staff of closed/ merged branches/ offices to work from home to reduce running expenses

The third phase regarding staff related matters including separation cost is being worked out in consultation with the SBP and SME Board of Directors which is likely to be finalised at the end of September 2023. The SBP has planned to initially lay-off 156 gratuity-based/ contractual employees at a total cost of Rs 539 million subject to availability of the funds for the purpose.

Copyright Business Recorder, 2023


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