Sindh government seeks to set up 'Sindh Bank': process begins

Sindh government has committed to spending Rs 10 billion for creation of 'Sindh Bank' and has started the process of putting up a structure in order to meet the conditionalities required to obtain a banking licence, it is reliably learnt.
The former head of PICIC Commercial Bank (now NIB Bank) and MyBank (now Summit Bank) Bilal Sheikh has reportedly been given the task of formation of the bank. And, the Finance Department of Government of Sindh advertised last week vacant situations to hire Chief Financial Officer and Head Human Resource.
The process started when the State Bank of Pakistan in August indicated its no-objection to the proposal provided the banking company was incorporated and made to fulfil all the required criteria including seeking approval of a business plan, having a Board of Directors and senior management as per the "fit and proper criteria" stipulated by the Prudential Regulations of SBP.
It may be recalled that the Sindh government had been very keen to own a bank and had also sought permission to acquire RBS (Pakistan). It was, however, denied the permission by SBP earlier in the year on ground that a proper "shell company" or a company that exists but does not actually do any business or have any assets had to be established for such an acquisition.
Already faced with financial constraints, especially in the aftermath of the recent floods, it is not clear how the provincial government will organise the required resources towards establishing a banking company.
The sad history of misuse of Bank of Punjab and Bank of Khyber by provincial governments also has made the central bank worried as it would like both institutions to be privatised to avoid further misuse.
The country's Constitution does allow provincial governments to establish banks without any permission from the State Bank of Pakistan. However, in order to obtain a "scheduled bank", ie, a full-fledged banking company status, they have to be regulated by the central banking authorities. The bank shall, inter alia, ensure that it has adequate required policies, guidelines and training programmes upon commencement of business.