ISLAMABAD: The government and courts of Bangladesh were protecting people responsible for Rs18.5 billion bad debts and default to National Bank of Pakistan (NBP) and denying Pakistani officers to probe the matter and ensure recovery.

NBP President Syed Ahmed Iqbal Ashraf told the Senate Standing Committee on Finance that problem with NBP operations started 8-9 years ago when local general manager in Bangladesh exceeded his lending limit by extending credits to the same party on different names and kept on increasing lending portfolio without informing the NBP headquarters in Pakistan.

He said the issue propelled into a problem when the total bad debt reached Rs18.5bn in 2013-14. He said the bank had now made full provision for the bad debt as required under the State Bank of Pakistan rules and was initiating process for the recovery of amount.

Chairman of the Standing Committee Salim Mandviwalla lamented the role of NBP and the SBP in the case.

Ashraf said the Bangladeshi bank officers intentionally did not let the internal reports of the Bangladesh central bank to reach Pakistan and internal and external audits also could not access NBP Bangladesh operations for two years. “It was a total failure on our part to see the signs” which were brewing and no remedial action could be taken head-on for 8-9 years.

He said it was decided in 2014 to order an audit to know what exactly happened in Bangladesh through KPMG and to make provision for bad debt. He said the KPMG report was also submitted to the SBP and the Ministry of Finance which was subsequently forwarded to the National Accountability Bureau (NAB).

He said based on KPMG report, the NBP had identified 61 officials including a few former presidents of the NBP who had something to do with the debacle and confirmed that the buck ultimately has to stop at the president, perhaps not because of any direct role but negligence as head of the institution.

Responding to a question, he said the loan default took place in Bangladesh where Bengali staff was involved in fraud in connivance with their local companies which also included a firm having an office in Pakistan.

“It is very sad and unacceptable that nobody had been held responsible for the Dhaka debacle” and no action had been taken so far for the recovery, said Mandviwalla.

Ashraf said the Bangladesh government was all out in support of the culprits and did not let Pakistani nationals to work there as they were denied NOC and four officers who reached Dhaka were accused of being there to topple the government and returned.

He said the only way to take action against Bangladeshi staff was through the courts and whenever the NBP tried to take action the local media exploded the issue that Pakistani banks were treating local workers unfairly.

It was reported that a total of 61 officers had been identified by the NBP for losses suffered by the NBP’s Bangladesh operations during 2003-2008 and the bank had chargesheeted 57 officers. Four former presidents of the bank still remain off the hook.

It may be recalled that about couple of months ago, the ECC led by Finance Minister Ishaq Dar had decided to bail out the NBP Bangladesh operations with $65 million (Rs6.6bn) public money. The decision was made after the Bangladesh branch’s equity eroded because of Rs14bn losses due to loans that were deemed unrecoverable from the outset.

Extended after 2003, the non-performing loans (NPLs) of the NBP Bangladesh came to light in 2008 when a borrower defaulted on letters of credit.

Published in Dawn, August 19th, 2015

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