The federal cabinet is expected to approve the corporatisation of the House Building Finance Corporation (HBFC) converting it into a limited company, sources in the finance ministry told Business Recorder. The cabinet is scheduled to meet on June 27 under the chairmanship of Prime Minister Shaukat Aziz.
The Finance Ministry has asked the cabinet to issue ''vesting order'' authorising the ministry to transfer all assets and liabilities of the existing company to the new company, the sources added. The sources said that the proposal had to be considered by the cabinet a couple of months ago but it was dropped from the agenda on the request of the sponsoring ministry.
HBFC was established under House Building Finance Corporation Act, 1952 with the objective to provide financing for the construction, reconstruction, repair and purchase of houses.
At present, HBFC is being regulated by the State Bank of Pakistan (SBP) as per section 3(a) of BCO, 1962. The federal government and the SBP are the joint shareholders of the corporation with equity of 62.5 percent, and 37.5 percent respectively.
The sources said that HBFC over the years, due to various inherent inefficiencies, has incurred heavy losses. Nearly 2/3 rd of its Rs 20 billion. "The institution could face an additional loss of Rs 6 billion if immediate proactive remedial measures are not taken," the sources continued.
Keeping in view the weak financial position of HBFC in line with the financial reforms policy of the government, the ministry is of the view that the company needs to be reorganised and restructured for converting it into a Public Limited Company on the pattern of ZTBL, IDBP and SME Bank.
After corporatisation, it would be able to realise its new vision and focus on Small and Medium Housing (SMH) finance for lower and middle-income groups of the population, the ministry said.
They said, the Finance Ministry had submitted a summary along with a bill for corporatisation of HBFC to the cabinet on June 16, 2004 proposing that, as a first step, its name may be removed from the Banks Nationalisation Act, 1974.
The cabinet approved the bill, which is now lying before the Senate Standing Committee. The committee will take up the bill after completion of the process of corporatisation.
The sources further said that all the pre-requisites for the corporatisation of HBFC have been completed in consultation with all the stakeholders, including the SBP.
The proposed HBFC Ltd has already been registered as a new company with SECP under Companies Ordinance 1984 and its Memorandum & Articles of Association have been prepared and cleared by SBP. The next step is to issue the "vesting order" to transfer the assets and liabilities of HBFC to new company ie HBFC Ltd.
After issuance of "vesting order" a notification will be issued by the Finance Ministry to declare HBFC Limited as a new financial institution / company under Section 3(a) of BCO 1962.
All the assets and liabilities of the existing company (HBFC) will be transferred to the new company (HBFC Limited). Appointment / clearance of New Board for new HBFC Ltd, is under process. The ministry has assured the cabinet that with this procedure the functioning of HBFC will not be affected even for a day as corporatised HBFC Ltd, will commence functioning immediately on the issuance of the "vesting order".
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