KARACHI: The State Bank of Pakistan’s officials will be indemnified against inquiry or investigation by the National Accountability Bureau or Federal Investigation Agency under proposed...
KARACHI: The State Bank of Pakistan’s (SBP) officials will be indemnified against inquiry or investigation by the National Accountability Bureau or Federal Investigation Agency under proposed amendments into the central bank law, a statement issued on proposed amendments said on Thursday
“The governor, deputy governors, directors, members of any board committee and monetary policy committee, officers and employees of the bank will not be liable in their personal capacity for any act of commission or omission done in their official capacity in good faith and in case of any such proceedings they will be indemnified by the bank, which shall bear all the expenses thereof, till final decision of the case,” it added. “No action, inquiry, investigation or proceedings shall be taken by NAB, FIA or provincial investigation agency, bureau, authority or institution by whatever name called without prior consent of the board of directors of State Bank.”
Further, no suit, prosecution or any other legal proceeding including for damages would lie against the bank, board of directors or member thereof, governor, deputy governors, member of any board committee and monetary policy committee, officers and employees of the bank for any act of commission or omission done in exercise or performance of any functions, power or duty conferred or imposed by or under this act upon such persons or any rules and regulations made thereunder or any legislation administered by the bank unless such act is done in bad faith and with mala fide intent, according to SBP statement.
In Pakistan, the SBP’s was first defined in the SBP Act 1956. Since then, the SBP Act has been amended several times. Major revisions in the SBP Act came in 1994, 1997, 2012 and 2015. The introduction in parliament of SBP Amendment Act 2021 is a continuation of that process.
The proposed amendments in the law governing the SBP are expected to clearly define the objectives of the central bank, improve its functional and institutional autonomy, and strengthen its accountability.
Under a proposed change, the SBP’s primary objective will be domestic price and financial stability and to support government’s economic policies to foster development and fuller utilization of resources.
The authorised and paid-up capital will also be increased to Rs500 billion and Rs100 billion from Rs100 million. Paid up capital and general reserves will be increased to eight percent of the monetary liabilities of the bank through retention of 20 percent of distributable profits each year. General reserve will only be used for increasing capital or cover losses.
It was further proposed that if capital and general reserves fall below zero the board would prepare a report on causes and extent of shortfall and the federal government would transfer to the bank necessary amount in cash or negotiable instruments to restore paid-up capital. Under the proposed changes, there will be no new government borrowing compared to existing limited zero net quarterly borrowing.
Quasi-fiscal operations, defined as monetary actions taken on behalf of the government, will be discontinued. However, refinancing facilities, which SBP has used to support access to credit in underserved sectors, will be allowed.
Currently, SBP is mandated to carry out quasi-fiscal operations, including rural credit, industrial credit, export credit, loans guarantees, and housing credit.
Under the new SBP law, SBP governor and minister of finance will establish liaison and keep each other fully informed on all matters which jointly concern the bank and the finance division.