The International Monetary Fund (IMF), the banking analysts said, has advised the State Bank of Pakistan (SBP) to monitor implementation of the time-bound action plan addressing the Capital Adequacy Ratio (CAR).
The State Bank of Pakistan (SBP), through a circular it issued on April 15, 2009, had prescribed that the minimum paid-up capital for banks be raised to Rs 10 billion by the year ending December 31, 2013.
Further, vide its aforesaid circular; the SBP has prescribed the banks to achieve Capital Adequacy Ratio (CAR) of 10 per cent with effect from December 31, 2009.
“The SBP, however, has been lenient and provided multiple extensions to banks facing shortfall,” said Shajar analyst Raja Wasif Ullah.
Nonetheless, he said, as a signatory to the “Memorandum of Economic and Financial Policies” (MEFP) with IMF, the State Bank would now be required to make sure that all banks enhance their capital to meet the regulatory CAR requirement of 10 per cent not later by December 31.
Although the international lender did not name any particular bank, Raja, citing his research, said three private sector banks and one state-owned bank to be under strict scrutiny on violating the CAR threshold of 10 per cent.
KASB Bank, Summit Bank and SilkBank are the private banks that would require improving their CAR, whereas Bank of Punjab was the lone state-owned offender. According to the analyst, the banks currently facing a depress CAR would be required to inject capital to improve on the regulatory requirement in conjunction with a decreased appetite for risk. Of the above-mentioned banks, Bank of Punjab had been extended commitment by the government of Punjab for assistance in meeting the shortfall.
