National Bank of Pakistan (NBP) has finally decided to proceed against 26 top officials including seven Bangladeshi nationals for causing a loss of Rs14 billion because of what NBP President Iqbal Ashraf said was a complete breakdown of the command and control system.
In his testimony to a panel of the National Assembly, Ashraf said on Tuesday the bank management would take action against all the officials responsible for causing the loss. This will also include criminal proceedings against seven Bangladeshi nationals, hired by the bank to run its local operations, before the end of this month.
Ashraf was speaking before a sub-committee of the National Assembly Standing Committee on Finance and Revenue. It was constituted to take action against the NBP officials after the management dragged feet.
The Banker Pakistan that NBP’s Bangladesh operations sustained a loss of over Rs11 billion and the management was trying to protect the accused.
“It was an absolute breakdown of command and control at the branch level, regional head level and at head office,” admitted Ashraf. He said the loan portfolio “was engineered to default from day one”.
He said the regional head and the head office did not take prompt action to rectify the situation.
“Out of 26 persons, seven are Bangladeshi nationals, four are Pakistanis who were working in Dhaka, four Pakistanis were working at the NBP regional headquarters in Bahrain and were directly responsible for the operations and 11 were working at the NBP head office in Karachi,” said Qamar Hussain, Head of Human Resources Department of the bank.
The option of putting the names of the accused on the Exit Control List was also under consideration, said Hussain.
Ashraf said a legal team was being engaged to frame charges and action would be taken before the end of December. The Bangladesh operations had started sustaining losses from 2003, he added.
Action is being taken on the basis of findings of an audit report prepared by KPMG that NBP hired in April this year to determine facts.
Quoting the report, NBP Senior Executive Vice President Masood Karim Sheikh said in 2003, certain amendments were introduced in the bank’s functions and responsibilities and some responsibilities were taken back from the Overseas Banking Department. This action, he said, created ambiguity and powers to sanction loans were also not clear, which were grossly misused.
Facility letters to the borrowers were issued without taking credit reports from Bangladeshi regulators. Loans were given without visiting premises, getting legal opinion and audited financial statements. NBP officials did not seek insurance and collaterals against heavy lending.
Sheikh said the auditors too could not play their role effectively and the head of Bahrain region from where the Bangladesh operations were controlled was also directly responsible.
“More than 90% of the $150 million Bangladeshi loan portfolio was non-performing,” said Muneer Kemal, Chairman of NBP board of directors.
One of the accused was Zubair Ahmed who was the regional in charge of the Bahrain region. Ahmed had told The Express Tribune that the head of Bangladesh operations concealed the reality from him for four years. Ahmed said he came to know about the non-performing loans (NPL) in 2008 when a borrower defaulted on a letter of credit.
He put the responsibility on Rafiq Bengali who fled to the United States. Another official Jehanzaib Khan was also held responsible.
Convener of the sub-committee Qaiser Ahmad Sheikh observed that the lacklustre approach by the then NBP management could have created problems in other branches as well.