ISLAMABAD A massive fraud involving unauthorised disbursement of millions of rupees loan is unfolding itself in the National Bank of Pakistan (NBP) branch in Gilgit, a severe blow to the bank's efforts to extend its presence in the Northern Areas by opening up new branches and increasing the size of its loan.

Well-placed sourced told Dawn that the NBP has launched investigations into the fraudulent disbursement of Rs50million loan in the name of Pak China Sost Port Company by its Gilgit branch.

The probe, which has been initiated on the request of the company a few months ago, has so far revealed similar scams involving as much as Rs880million in the same region, insiders said.

The collaterals pledged by people involved in the scam is believed to be fake and non-existent  raising questions as to who in the cadre of the bank was/were involved in the matter that kept such a huge scam away from the magnifying-glass observations of the audit department for three years.

The scam was overlooked during the audit process. Now, it also being determined as what kind of lapses took place at the 'branch level' and as to why proper securitisation of the loan did not take place.       

An 'exception report' has been sent to the bank president by the NBP Compliance Group in which the group has said that it had received a preliminary report on the issue by the NBP's human resource management and administration. The group had received a complaint on November 12, last year and had subsequently reported the matter to the State Bank of Pakistan.

Sources told Dawn that the bank had, however, yet to lodge a complaint with the police as required under the rules in such cases.

The Pak China Sost Port Company (Pvt) Ltd was established in 2002 as a joint venture between Pakistan's Silk Route Dry Port Trust that holds 40 per cent share and China's Sinotrans Xinjiang Jiuling Transportation & Storage Co. Ltd which holds 60 per cent share in the company.

The Chinese side had invested in cash while the Pakistani side in the shape of their land.

The Rs50million loan has been given to six persons including four Chinese and two Pakistanis against mortgage of property, hypothecation of stocks and personal guarantees. Their names are Yuan Jiamnmin (chairman of the board of the company), Prince Salim Khan (vice chairman of the board), Chen Mingxing, Raja Shahbaz Khan, Hou Enzu and Miss Wing Ping.

The sanction advice for the loan had been issued by the regional office Gilgit by accepting Mir Ghazanfar Ali Khan, Chairman of the Silk Route Dry Port Trust, as guarantor.

'Give me two months and I will be able to give you a clear picture of what happened,' President NBP Ali Raza told Dawn.

He said he had ordered investigations into the matter and had held a meeting with officials of the Northern Areas Chambers of Commerce and Industries, who had offered full support to the bank in completion of its probe.

'It is not a big issue,' Mr Raza said.

He said NBP was the sole entity that was playing an active role in the development of the area by extending loans to businesses in the area. The total size of NBP loan in Northern Areas was Rs1billion, which needed to be increased, he added.

When asked that it was believed that the total amount involved in the scam was almost 80 per cent of the total loan the NBP had disbursed in the area, he said 'It does not matter whether the amount is in thousands, millions or billions. Every thing will be clear soon,' he commented.

When the attention of Mr Raza was brought to the issue that the audit of the Gilgit branch had been conducted by the same individual twice (during 2005 and 2007), while in 2006 no audit was ever conducted, and when he was asked whether there was the possibilities of that the bank's staff was involved in the matter, he said

'You know access to NAs is not very smooth like Lahore, Karachi and Islamabad. Sometimes, the audit can be delayed.'