The government has decided to revamp Zari Taraqiati Bank Limited (ZTBL) after issues pertaining to its financial viability and sustainability were raised at a recent meeting of Economic Co-ordination Committee (ECC) of the Cabinet. The task of Bank's revamping has been assigned to Secretary Economic Affairs Division(EAD) Tariq Bajwa, who has sought a business plan from the management designed to make it financially viable .
The government rescued the Bank from its financial collapse through financial restructuring of Rs 94.6 billion.
Auditor General of Pakistan (AGP) detected billions of rupees of financial mismanagement in Zarai Tarqiati Bank Limited (ZTBL) besides declaring Kissan Support Service(s) Limited (KSSL), a company established without the approval of SBP, illegal.
According to the Chief Financial Officer(CFO) of ZTBL, the Bank's Board in its meeting held on July 18, 2014 and the shareholders of the Bank in extraordinary general meeting held on August 13, 2014 approved the conversion of SBP debt of Rs 89.491 billion into 8,949,089,476 fully paid-up ordinary shares as equity investment of SBP in the Bank and the ZTBL's claim against the GoP was waived-off/ written-off. However, owing to certain accounting issues raised by the external auditors of SBP, the transaction could not be executed.
On December 28, 2016 ECC was informed that Government of Pakistan had issued guarantees amounting to Rs 51.257 billion to State Bank of Pakistan (SBP) in favour of ZTBL from November 11, 1985 to November 22, 1993. While converting ZTBL into a public limited company, the subordinate debt of Rs 3.204 billion of SBP was also guaranteed by the GoP on November 18, 2002. The guarantees had not been executed. The total outstanding debt of SBP including principal amount and mark up against ZTBL was Rs 90.616 billion as on December 31,2015.
The whole issue was considered by Finance Division and it was decided that the principal debt amount of Rs 54.460 billion outstanding against ZTBL as on December 31, 2015 be converted into redeemable preference shares carrying profit of 7.5 per cent per annum, redeemable in 10 years in one bullet payment on December 31, 2025. The principal of the preference shares ie Rs 54.660 billion and return would be guaranteed by the Federal Government. The accrued mark up of Rs 40.156 billion as on December 31, 2015 was approved to be converted into ordinary shares of ZTBL.
According to Ministry of Finance, shareholders of the ZTBL had approved conversion of SBP debt into ZTBL equity. Corporate formalities in this context had been completed with the SECP. The principal debt of the preference shares and return would be guaranteed by the federal government.
ZTBL management had requested for issuance of guarantee of Rs 54.460 billion by the GoP in favour of SBP for principal debt of the preference shares and return thereon. The fresh guarantee of total value of Rs 54.460 billion would be required in lieu of previous guarantees and debt repayment guarantees. Accordingly, the draft guarantee was forwarded to Las and Justice Division for vetting, Ministry of Law and Justice had vetted the guarantee.
Ministry of Finance requested the ECC to approve issuance of guarantee of Rs 54.460 billion by GoP in favour of SBP for principal debt of the preference shares and return thereon.
After detailed discussion, the ECC approved the proposal on the recommendation of Finance Ministry. The ECC also directed Secretary EAD to convene a meeting with the ZTBL management for preparing of a revamping plan for the Bank and present to the ECC in its next meeting.
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