SBP links Sindh-Summit banks merger with provincial cabinet’s nod

ISLAMABAD: State Bank of Pakistan (SBP) on Thursday said it has no objection over the proposed merger of Sindh Bank with Summit Bank if the provincial government approves the deal.

“The deal will be finalised once we receive approved minutes of the (Sindh) provincial cabinet,” Deputy Governor SBP Jameel Ahmad told the Senate Standing Committee on Finance. Ahmad said there will be no deadline, “but both the parties would have to comply with the prerequisites to move ahead with the merger”.

Sindh Bank’s representative Bilal Sheikh and Summit Bank’s executive Husain Lawai told the committee that they had already missed the deadline of December 2017 to finalise the merger deal since the Sindh cabinet did not approve it within the stipulated timeframe.

Senator Saleem Mandviwalla headed the committee’s proceedings at the Parliament House.

Summit Bank had agreed to merge into Sindh Bank under a share-swap arrangement under which 1 (one) ordinary share of provincial government-owned Sindh Bank Limited was proposed to be issued for every 3.85 ordinary shares of Summit Bank. Omni Group’s Chief Operating Officer Khawaja Salman Younis said restructuring of the group’s outstanding loans of over Rs30 billion hit stumbling blocks.

Younis alleged that the group is facing ‘political victimisation’ as the banks are passing the responsibility of the delayed restructuring on SBP, which is passing the buck to the banks.

“Our accounts have virtually been blocked in the aftermath of classification and provisioning of loans done by the banks under the directives of the central bank,” he said.

Younis, accompanying his legal counsel, said the banks as well as the central bank facilitated more than two dozen companies facing the same problem.

Senators recommended the SBP to ensure same treatment to Omni group as provided to other companies having the same issues.

Deputy Governor SBP assured the committee that the central bank is a national institution and no question of discrimination arises in dealing with any individual or business group.

Mandviwalla and other senators probed the need of seeking permission of the central bank when there are prudential regulations about loans provisioning.

They said the boards of the banks have discretion over the loan provisioning keeping in view their balance sheets.

The senate panel also took up an issue of tax exemption worth Rs 11 billion awarded to a Chinese company constructing a portion of Multan-Sukkur motorway.

Senator Murtaza Wahab said the Federal Board of Revenue (FBR) granted the exemption without seeking approval of the federal cabinet and at the time when 37 percent of construction works were complete.

FBR’s Member Inland Revenue Policy Muhammad Iqbal said the Economic Coordination Committee of the cabinet approved the tax exemption for the Chinese construction company, which was later on ratified by the federal cabinet.

Iqbal said ministry of communication moved the summary related to tax exemption and so the ministry could reply to question in more details.

Senate committee decided to summon the high-ups of ministry of communication for seeking further details about the project during the next meeting.

Senator Saud Majeed argued that the grant of the project on build-operate-transfer basis is not commercially viable.