LAHORE, Oct 2: Small, individual depositors of Crescent Standard Investment Bank Limited (CSIBL) are getting jittery about the `security’ of their savings with the passage of each day because, according to one depositor, “no positive report about the future of the bank is forthcoming” from the present management or the regulators.
“We are very much worried about our family’s savings kept with the CSIBL because no bank official is giving us any concrete information as to when shall we be returned our money,” a depositor, who approached this reporter, said.
“Each time we visit the bank, we are told a different story,” he said. “First we were told that the management is trying to sell the bank. Today we were told that the company may be liquidated if it is not sold in the next few weeks. When we requested that our money be returned, we were told that it is not possible in the given situation,” he added.
“The depositors should be informed about the exact situation as they have a stake, however small it may be, in the future of the bank,” the depositor said. “The present management or the regulators should provide proper information about their plans regarding the future of the company to the depositors for alleviating their worries.”
According to a senior official of the Securities and Exchange Commission of Pakistan (SECP), individual deposits with the bank totalled around Rs1.60 billion.
When contacted, CSIBL administrator Badr-Ud-Din Khan told Dawn that the bank had already begun to return individual depositors whose deposits had “matured”. He said the bank was paying back money to the depositors with deposits up to Rs500,000. “If someone has deposits exceeding half a million rupees, he will get back the rest of his money next month,” he added.
He also stated that the bank also planned to return the money to the individual depositors whose deposits had so far not matured. “But that depends on the availability of funds. If we get money from somewhere, we shall happily start paying to all individual depositors irrespective of the fact whether or not their deposits have matured if we have funds.”
He, however, made it clear that only “individual depositors will get their money back and not the institutional creditors or depositors”.
The SECP suspended the company’s board of directors and the CEO and appointed an administrator to run its affairs on Aug 30 in an unprecedented move after the detection of gross financial irregularities in its affairs following months of investigations into its affairs. The SECP investigations had revealed deliberate violation of the legal requirements by the main sponsors, the Crescent Group of Companies, and serious financial irregularities, including illegal maintenance of parallel accounts, concealment of the bank’s assets, unauthorised massive funding of the group owned companies, and unlawful investments in real estate and stock market, etc. The bank’s current assets are valued at about Rs8 billion against its liabilities of Rs9.5 billion, showing a gap of Rs1.5 billion.
Mr Khan had told Dawn a few days back that he was trying to sell the bank to some prospective buyers interested in reviving the company by injecting fresh capital in it. He had claimed that two investors from the financial industry had shown interest in the acquisition of the bank. He had stated that he wanted to save the bank in order to protect the interests of its depositors as well as creditors. “It would not be in the interest of the bank’s depositors and creditors to sell its assets to pay them off. There is a gap between the (total estimated value of) bank’s assets and liabilities (towards depositors and creditors). If we sell the assets, everyone will be a loser. Hence, we are trying to revive the bank by selling it to a prospective buyer so that everybody emerges as a winner,” Mr Khan had said.
The new management also claims to have reached an understanding with its institutional investors/creditors that they would forgo interest payment on their investments/credit to help stop bleeding of its assets and resources as around 80 per cent of the bank’s expense is on account of interest accrued on its loans (obtained on very high rates).
The sponsors of the bank also “offered to cooperate” in the effort to revive the company when the administrator approached them to pay back the amounts transferred (by them) to their group-owned companies so that the bank could be sold and revived for the protection of interests of all stakeholders. But no practical step has so far been taken by them in this regard, heightening the fears of the small depositors regarding the future of their savings.
