March, 14 2005	Monday	03 Safar 1426

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ISLAMABAD, March 13: The Industrial Development Bank of Pakistan (IDBP) has suffered a loss of Rs24 billion resulting in negative equity of Rs23 billion, reveals the Auditor General of Pakistan (AGP) report for 2002-03.

The report says the bank was unable to maintain the required paid-up capital of Rs1 billion.

The bank had equity of Rs907.548 million — including Rs157 million of shared capital and reserve funds and Rs750.548 of other reserves — as on June 30, 2003, against which accumulated losses stood at about Rs24 billion.

It revealed that due to disproportionate decrease in mark- up/interest expenses and income, the losses before taxation increased by 96.6 per cent, i.e. from Rs2 billion to Rs3.95 billion. The accumulated losses also increased by 19.85 per cent from Rs19.92 billion to Rs23.87 billion during 2002-03 compared to the previous year.

The report stated that “The long-term solvency of the bank appears to be questionable. As on June 30, 2003, the liabilities of the bank amounted to Rs36.71 billion against assets of Rs13.98 billion, showing negative net assets of Rs22.73 billion.

“These facts indicate the existence of a material uncertainty which may cast significant doubts on the bank’s ability to continue as going concern. The bank may be unable to realize its assets and discharge its liabilities in the normal course of business.”

LESS REALIZATION OF DECREED AMOUNT: The bank sanctioned Rs10.156 million on May 21, 1978, in favour of Farmaish Industries for import of machinery to set up polythene sacks manufacturing unit in Lasbella, Balochistan.

Another Rs10 million assistance in the shape of working capital was provided by the bank to the same company. However, the company did not run successfully and had to close down its operations in 1990.

Due to the persistent default in repayment by the company, the IDBP filed a petition against it in Sindh High Court, Karachi, for recovery of Rs24.45 million. Resultantly, the mortgaged project assets were auctioned on February 21, 2001, for Rs10.5 million of which the bank received an amount of Rs5.3 million in May 2003.

The report said the matter was reported to the management in March 2002, which stated that they had received a sum of Rs4.89 million from the auction proceeds. It intimated that at the time of sanction of the loan, the project was conceived economically viable.

NON-RECOVERY: The IDBP Regional Office Karachi disbursed a foreign currency loan equivalent to Rs8.61 million to Fountain Blue Textile Mills in 1987, recoverable within 12 years. The loan was secured against mortgaged property and assets valued by the IDBP at Rs12.72 million.

The report says the loanee defaulted and not even a single instalment was paid. The IDBP filed a recovery suit for Rs13.029 million in the Sindh High Court in 1991. The court decreed for auction of property and assets on April 20, 1992.

An amount of Rs425,000 was realized on auction of the plant and machinery. The recovery of the remaining amount of Rs12.6 million from auction of mortgaged property and remaining assets having assessed value of Rs2.6 million was impossible as these assets were in deteriorated condition. Resultantly, IDBP had to sustain a loss of Rs12.6 million.