ISLAMABAD: At a time when the entire banking industry in Pakistan has thrived and earned billions of rupees profit with the exception of Sindh Bank Limited (SBL) that incurred around Rs29.15 billion loss from 2018-2023. This financial downfall is attributed to a trail of bad loans granted to fictitious accounts and non-performing loans linked to a specific business group closely associated with a political party.
The bank that reported a profit of Rs13 billion from 2011-18 faced near bankruptcy from 2019 to 2023. The documents available with The News reveal that the Sindh government being the major shareholder of the Sindh Bank covered up these losses stemming from bad loans to the group. The provincial government consistently injected Rs23.7 billion equity from the taxpayer’s money to support the deteriorated capital adequacy ratio (CAR) from 2019-23.
Interestingly, when the bank was suffering huge losses and meeting its CAR requirement through public money, the bank wrote off loans of millions of rupees for the group’s family members, documents show.
In 2018, the Supreme Court of Pakistan took a suo motu notice of the alleged fake accounts and money laundering and linked the entire saga with a political leader and his close associates. The apex court in its judgement dated January 7, 2019 ordered NAB to complete the investigation within two months and file a reference in the concerned accountability court.
“We find that a network of carefully structured fake accounts has been put in place and transactions have been undertaken through a process of layering designed to hide the real beneficiaries of the transactions. Further, it appears that a money laundering mechanism has been devised to legitimize funds whose source and legitimacy is highly questionable,” reads the Supreme Court judgment.
As per the official documents, the Sindh Cabinet approved a budget allocation of Rs11.7 billion and Rs3 billion in June 2019 to meet Sindh Bank’s capital shortfall. Similarly, the provincial cabinet again approved the equity injection of Rs4 billion to support the bank’s deteriorated Capital Adequacy Ratio (CAR).
Despite suffering such huge losses in the past four years and ample equity injection by the Sindh government, the bank losses could not be stopped. The provincial cabinet again approved another Rs5 billion’s equity injection in June 2023 just before completing the five years term of the PPP government.
The documents show that on July 27, 2023, Sindh Cabinet summoned a special meeting to brief the provincial cabinet about the banking issues related to Sindh Bank. The chief operating officer (COO) of the bank appeared before the provincial cabinet and gave a detailed presentation of the bank’s performance for the past five years.
Interestingly, the bank’s COO blamed the investigation agencies for its poor performance and huge losses. The provincial cabinet was informed that from July 2018 to June 2023 SBL incurred huge losses before tax of Rs29.15 billion due to pressure put by the investigation agencies on some of the parties which were provided loans including the specific group and related entities, documents reveal.
The official documents show that the bank has filed 106 criminal and civil suits for a claim of Rs36.9 billion in various courts. However, the bank’s total recovery from these non-performing loans during 2019-23 was recorded Rs3.1 billion only.
Advocate General Sindh however contradicted the COO Sindh Bank during the cabinet meeting and briefed the forum that he has reviewed the pending litigation cases and the same are not being followed properly. The chief secretary also expressed reservations on the performance of the bank during the meeting. He said that all banks are making profits in the current situation unlike the Sindh Bank.
The question here arises that despite knowing the poor performance of the bank and a weak follow-up of its litigation in the courts involving Rs36 billion, why did the provincial government continuously cover it up and take no action against the bank’s top officials. Instead of taking any action, the Sindh government poured billions of rupees to cover the losses and hide those bad loans, a major chunk of which is associated with the group.
Interestingly, the group used the practices of fake bank accounts with other banks also. The Supreme Court of Pakistan in its 2019 judgement stated, “We found that prima facie enough material was available on record to support the fact that fake accounts had been opened in various banks in the names of persons whose National Identity Cards had been misused without their consent or knowledge.”
The Supreme Court explained in its judgement how these loans were acquired by the group. The apex court judgment said that during the course of hearing these matters, it was pointed out that the group had availed loans from various banks including National Bank of Pakistan, Sindh Bank Limited, Summit Bank Limited and Silk Bank Limited. “These loans had been secured by hypothecation/pledge of stocks of sugar. Upon verification, it was found that pledged stocks fell substantially short of what was pledged and considerable stocks were missing from the total pledged stocks valued at Rs13.5 billion. Stocks worth approximately Rs.2 billion were available in the godown while there was a deficit of Rs11.5 Billion,” the judgment noted. The claims made in the Supreme Court’s judgment can be verified from the annual report of the SBL. According to the 2022 annual report, a major chunk Rs17.22 billion of bank’s non-performing advances belong to the sugar Industry. Whereas, the power, agriculture, real estate and petroleum sector are also key industries contributing to the bank’s non-performing loans.
The News sent a detailed questionnaire to President Sindh Bank Imran Samad on August 28, 2023. However, despite repeated reminders he did not respond to those queries. This scribe then contacted Chief Financial Officer (CFO) Mr. Dilshad Hussain Khan. He asked to send the questions in written form. Upon doing so, he told this scribe to talk to the bank’s head of marketing and media team. When contacted Miss Saima Aziz head of Sindh Bank’s marketing and media department, she said all those questions related to the bank’s poor performance and non-performing loans are correct. She then directed this scribe to get the latest financial indicators from the bank’s official website as all the queries are answered in the bank’s annual report.
The News also sent a questionnaire to former Chief Minister Sindh Syed Murad Ali Shah on August 28. Despite reading all the messages sent by this correspondent he did not reply to those queries. This scribe then sent a questionnaire to former Information Minister Sindh Sharjeel Memon. He too read the messages but did not respond despite repeated reminders. Another provincial minister Syed Nasir Shah was also contacted but he chose not to respond to any calls or messages of this scribe.
