The government has decided to convert Rs 106 billion loans of House Building Finance Company Limited (HBFCL) and Zarai Taraqiati Bank Ltd (ZTBL) that they owe to State Bank of Pakistan into equity at par. A meeting chaired by Finance Minister Ishaq Dar on the issue and attended by all the three stakeholders - State Bank of Pakistan (SBP), HBFC and ZTBL - took this decision unanimously. The Finance Minister said that it was very unfortunate that both these important financial institutions had poor balance sheets and were not performing up to the expectations.
He said that agriculture credit and sustainable agricultural growth were the government''s budget strategy preferences. The meeting unanimously decided to convert their loans into equity at par and for immediate payment of interest by HBFCL to SBP. The meeting also decided that all legal, corporate and administrative requirements would be completed by July 21, 2014 subject to approval by the SBP Board of Directors to resolve 15-year-old outstanding issues, which had been hampering the performance of both the critically important financial institutions. Dar was informed that HBFCL owed Rs 13.2 billion since 2006 and the institution had not been able to clear its overdue credit line. It may be mentioned that HBFCL was doing no business for the last many years, nor was it able to recover loans from defaulters. Whereas, the salary bill is consuming whatever meagre earning they have in the form of repayment of house building loans.
The Finance Minister was further informed that ZTBL owed Rs 93.2 billion (principal Rs 54.5 billion, mark up 38.7 billion) to the State Bank of Pakistan and the credit line had not been cleared for the last 15 years. A balance sheet of ZTBL has hampered its progress and financial standings. A number of new initiatives have been announced in the budget to boost agriculture sector. On the other hand, house building industry was also an important catalyst for economic turnaround in the country. He said that in line with the priorities of the political leadership of the country, the government would like to strengthen both the institutions so that they could aggressively market their products.
The Finance Minister while addressing the management of both ZTBL and HBFCL emphasised that they had to start a new beginning with new management and boards to aggressively market their products and a task force should be formed for the recovery of non-performing loans. He said that expectations from new management were that they would strengthen both the institutions and reform and restructure the institutions with the objective of making them vibrant financial institutions with robust balance sheets.
The meeting was also attended by Governor State Bank, Ashraf Wathra, Finance Secretary, Dr Waqar Masood, Chairman SECP, Tahir Mahmood, President ZTBL, Talat Mehmood, MD HBFCL, Pervaiz Saeed, Advisor to the Finance Ministry, Rana Assad Amin, Additional Finance Secretary/SA to Finance Minister, Shahid Mahmood and senior officials of the Finance Ministry.