Ministry and State Bank pave the way for Sindh Bank


The Ministry of Finance and the State Bank of Pakistan have in principle approved the establishment of Sindh Bank Limited (SBL), Pakistan Today learnt Wednesday.
However, the central bank would issue a formal license to the provincial government only when the latter fulfills the regulatory conditions required for the development of a bank.
The Sindh government, in a meeting of the Revenue Department held at the Sindh Chief Minister House under the chairmanship of Chief Minister Qaim Ali Shah on May 25 this year, had approved the setting up of Sindh Land Bank Company (SLBC) with the aim to facilitate investors in acquiring land for projects in a transparent manner.
Sources at SBP told Pakistan Today that the central bank had issued an NOC (non-objection certificate) to the Sindh government for establishing the Sindh Bank. They said that the provincial government had also received approval from the Ministry of Finance to set up of the long-awaited bank.
“One must not misconstrue the issuance of an NOC with licensing of the proposed bank,” sources warned clarifying that “an NOC is an approval in principal.”
Sources stated that the provincial government, as per regular practice, was required to get the proposed bank registered as a company with the Securities and Exchange Commission of Pakistan (SECP). According to Shakil Ahmed, communication head of the SECP, the commission had approved the name ‘Sindh Bank Limited’, as earlier proposed for the new bank. “If they want to take it they may,” Shakil said.
However, the SECP official gave a negative response when asked if the Sindh government had formally applied for registration of the proposed company. The SBP sources said after getting registered with the SECP, the Sindh government would come back to the central bank for a license, the issuance of which was linked to the fulfillment of all regulatory requirements by the applicant.
The Sindh government would have to meet the Fit and Proper Test (FPT) criteria set by the banks’ regulator, SBP, under BPRD circular number 04 of 2007 for opening a new bank or DFI, they said. “One of the primary conditions is the minimum capital requirement of Rs 10 billion,” they added. The State Bank Pakistan’s FPT criteria might be challenging for the PPP-led coalition government which during the last two and half years has earned a bad name in terms of appointment of the blue-eyed boys on political basis.
The central bank’s criteria provide that the fitness and proprietary of the banks and DFIs be assessed on the basis of integrity, honesty, reputation, track record, solvency, integrity, qualification, conflict of interest and others. “First three elements are applicable to all categories of individuals, whereas the last three elements would be considered while assessing the FPT of directors, CEO and key executives of banks/DFIs,” it says.
The BPRD circular no. 04 of 2007 also states that “The banks/DFIs shall in future ensure that all fresh appointments and/or renewals of the members of Board of Directors, CEO and key executives are made strictly in accordance with the (above-mentioned) enclosed FPT requirements.” When contacted, SBP chief spokesman Syed Wasimuddin confirmed to this scribe that the central bank had given an NOC to the Sindh Government for establishment of the Sindh Bank.
The spokesman responded positively when asked if the Ministry of Finance had nodded to the proposed public sector venture. Wasim also backed the impression that a license to the Sindh Bank would only be issued after fulfillment of the regulatory requirements, including that of the minimum capital requirement of Rs 10 billion, by the Sindh Government.
The May 25th meeting of the Revenue Department had decided that the provincial government would frame the necessary rules and statement of conditions for the proposed bank. It was also decided that all encroachments on the government land would be removed immediately and prompt legal action would be taken against those grabbing the land.