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Pakistan: BoK to help implement: PM package despite Rs3b loss

Monday, 25 January 2010 09:38

Source: The News International
By: Riaz Khan Daudzai

Though the Bank of Khyber (BoK) would sustain Rs3 billion loss of income by giving incentives announced in the Prime Minister’s Package for the militancy-hit NWFP and its adjoining tribal areas, it intends to vigorously support the government in implementing the package. This was stated by Bilal Mustafa, managing director of the BoK, in an exclusive interview with The News. He said the province had been facing tough business environment since 2004, but the BoK continued to do well and attracted a sizable clientele over the last two years. “In 2009 our operational profit stood at Rs1 billion when the province was worst hit by militancy,” he said.

During the current year the bank will, however, face loss of income for a variety of reasons including the incentives offered under the PM’s package for NWFP, the BoK chief added. He said the BoK was prepared for the implementation of the package and it would provide all the facilities under it once the circular regarding the package is received.

Bilal Mustafa also said that only in Malakand the BoK would have to forego Rs113 million as markup on its loans. About the performance of the bank vis-‡-vis global recession, he said the BoK was the only intuition, which absorbed the shocks and did not resort to borrowing. Rather, he pointed out, its lending portfolio rose and even bigger banks sought lending from the BoK. He argued this was due to better liquidity management by the BoK administration.

Bilal Mustafa said that only $7 billion of the $23 billion home-remittances came through proper channels and the expatriates working abroad had sent Rs6 billion home-remittances through the BoK. “We are now planning to become a branchless bank by setting up points and centres for home-remittances and other transactions,” he explained. Talking about the transfer of management of the bank to private sector, he said it was under process and soon a decision would be taken in this regard.

Bilal Mustafa added that running management by private sector had become a global practice in the banking sector. However, he acknowledged that the paid-up capital, which was now over Rs5 billion, was one of the factors that forced the provincial government to take the decision of transferring the bank management to the private sector. He said as required by the SBP under its minimum capital requirement (MCR), the bank needed Rs1 billion every year to achieve the target of Rs10 billion paid-up capital by 2013.

The BoK MD said the government had planned to attract the required capital from the private sector. “But still the government will continue to hold 51 per cent shares of the bank, while 27 per cent of the existing shares will be transferred to the private sector,” he said.

The BoK chief said initially there were some legal hurdles in transferring of the bank management to the private sector. It required amendments to the Bank of Khyber Act and State Bank of Pakistan (SBP)’s no-objection certificate (NOC), but now the SBP has allowed deferment in this respect and soon BoK management would be transferred to the private sector. He also said that the SBP was also planning to inject Rs5 billion into the BoK on the lines it provided Rs10 billion to the Bank of Punjab to support its future interventions.