The Senate Standing Committee on Finance, Revenue, Economic Affairs, Statistics and Planning and Development on Wednesday unanimously recommended to the upper house to pass Industrial Development Bank of Pakistan (Reorganisation and Conversion) Bill, 2010, for the conversion of the IDBP into a public private limited company.
The committee's report, which was presented to the House on Wednesday by its chairman Senator Ahmed Ali, recommended with consensus that the bill as passed by the National Assembly, may be passed by the Senate also. The panel, in its report, pointed out that the major reasons for failure of the IDBP are weak collateral and the poor supervisory role of the State Bank of Pakistan (SBP) as well as the ministry of finance. Secretary Finance, however, told the committee meeting that held on February 24, 2011, that IDBP has been closely scrutinised by the Public Accounts Committee and it is regularly monitoring the recovery of its loans.
He also informed the panel that IDBP was a lender of small loans of Rs 50 million, which was later increased to Rs 100 million. He apprised the committee that 374 loan cases are pending with IDBP. Officials of the IDBP told the committee that Rs 260 million assets have been owned by IDBP.
Whereas, the Managing Director IDBP said that since 2004, the IDBP is practically non-functional and just paying deposits and administrative costs. The committee, in its report expressed great concern about mishandling of all the development finance institutions (DFIs) and delaying the process of the privatisation of the IDBP. The panel also showed great concern about the huge cost of Rs 24 billion, which would be paid by the government.
While replying to a question raised by the committee regarding the buyer of the IDBP, Secretary Finance informed that the final decision regarding selection of buyer would be taken of SBP. Regarding the timeline for completion of the privatisation of IDBP, the MD said as soon as the bill would be passed by the Senate a Vesting Order would be issued by the government under which the assets of IDBP would be converted into assets of IDBPL and SBP would proceed with its privatisation.
Secretary Finance said the ministry of finance would complete the process of issuance of vesting order in six months and it would take another six months to complete the process. About the fate of 209 employees of the IDBP, the MD said that out of 209 only 11 employees are permanent and would be privatised with the bank, while the remaining on contracts would be terminated through due procedure well before the transfer of the bank to a new buyer.
The Industrial Development Bank of Pakistan (Re-Organisation and Conversion) Act was re-promulgated on November 26, 2009 for repealing the Industrial Development Bank of Pakistan Ordinance, 1961 (XXXI of 1961) under which the entity namely, IDBP was established for providing credit facilities to industrial concerns. The ordinance was re-promulgated on November 26, 2009 for a period of 120 days. However, over a period of time the bad portfolio exacerbated IDBP's problems having an adverse impact on the financial condition of the bank. According to the statement of objects and reasons of the Bill, it is therefore, considered imperative to carry out financial restructuring of the IDBP.