‘Defunct’ SME Bank: ECC approves over Rs4.11bn to clear employees’ dues

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has approved over Rs 4.11 billion to settle arrears of defunct Small and Medium Enterprises (SME) Bank, well-informed sources told Business Recorder.

On April 4, 2024, the Finance Division sought permission of the Chairman ECC to table the summary as an additional item in view of the exigency in the matter. The chairman ECC allowed submission of the summary before the forum.

The Finance Division briefed the forum that the Federal Cabinet in its meeting held on March 17, 2023, approved winding down plan for SME Bank Limited. Accordingly, the State Bank of Pakistan issued instructions for winding down the Bank in three phases to close its business operations vide their letter of March 27, 2023. These phases included: (i) paying off the depositors, (ii) closure of branches and (iii) gradual reduction of operating cost including staff benefits.

The SME Bank noted that the first two phases were in final stages of completion. The third phase regarding laying off gratuity-based (contractual) and pension-based (regular) employees was finalized by the Board of Directors of SME Bank and Finance Division was requested for arrangement of the requisite funds. Subsequently, Finance Division asked SBP for input on the closure plan and employee separation cost.

The SBP, in its letter of February 16, 2024 advised to get the calculations related to separation package vetted from an actuary firm. SME Bank stated that the estimates had been duly verified by the Chartered Accountancy Firm M/s HLB Ijaz Tabussum & Co.

Accordingly, the Bank had requested for arrangement of Rs 4110.253 million to settle employee related obligations.

A summary of the funds required for this purpose is as follows: (i) post-retirement benefits and separation cost of 136 employees, Rs 3.304 billion; (ii) retirement benefits of four employees who got retired but retirement benefits, not yet paid, Rs 13.377 million; (iii) existing 69 pensioners lump sum obligation, Rs 587.259 million; (iv) former President’s terminal benefits, Rs 5.257 million; and (v) gratuity-based 27 employees, Rs 200 million.

The Finance Division further noted that the State Bank of Pakistan had indicated savings amounting to Rs 1.0476 billion under fiscal relief package of the GoP which may be utilized for the payment along with any other savings/provisions available.

The Finance Division requested the ECC for approval of Technical Supplementary Grant of Rs. 3,062.664million and utilization of savings amounting to Rs. 1,047 billion and 589 million under Fiscal Relief Package of the GoP available with SBP in order to settle employee related obligations of SME Bank Limited.

The sources said after detailed discussion, the ECC approved the proposal of the Finance Division for provision of Rs 4.110 billion for clearing dues to SME Bank’s employees.

Copyright Business Recorder, 2024