Banking ombudsman to be appointed soon: State Bank governor

KARACHI (April 01 2003) : Dr Ishrat Hussain, Governor, State Bank of Pakistan (SBP) has said that the government will soon appoint 'banking ombudsman'.

Addressing a meeting of Karachi Chamber of Commerce and Industry (KCCI) on Monday, he said that the banks ombudsman would exclusively deal with banking matters, complaints against banks, and disputes with bank clients.

He said that the State Bank is also making changes in Prudential Regulation as they are not fit and in many cases they are not practicable.

The governor said that different sectors like agriculture, small and medium enterprises (SMEs), industry etc would have separate prudential regulations.

Ishrat said that SBP has already contacted banking sector to suggest changes in prudential regulations.

The governor said that State Bank is also contemplating bankruptcy law which in non-existence in the country.

He said that SBP has already hoisted all its rules and regulations on its web site and advised the business community to go through them while making any deal or transaction with banks. “Policy making is the job of SBP and getting benefits from these policies is your job,” he added.

He advised the business community to come forward and make investment in the country as Pakistan economy is going on right path.

He said that in the last three years the government had made efforts to slowly improve its economic foundations,” and now by grace of God, we are on the right track”.

Pakistan's foreign exchange reserves have touched 10 billion dollars and it has prudently managed to reduce its debt, and policies implemented are of long-term.

He said that the government has stopped taking loans from World Bank and Asian Development Bank.

Now the government will take only soft term loans from these agencies. The government also managed to pay back 4.5 billion dollars loans.

The governor said that in last three years mark-up rates have been reduced from 13 or 14 percent to 3 to 4 percent, whereas financing rates have been reduced from 20 percent to 10 percent.

He said that in spite of this reduction in mark-up rate, investment ratio is very low and investors are not coming up to invest and establish industrial units in the country.

He said that the SBP has advised banks to provide loans to SMEs. SBP also issued BPD-29 to revive the sick units.

As a result of guidelines announced by ABL, Picic, National Bank etc a large number of cases have been referred for settlement.

The governor said that he has consulted BPD and a committee has been established, having two members from banks and one each from Aptma and FPCCI.

The committee decision in respect of stuck up loans would be final. “We want to clear the cases of stuck up loans so that the industry lying closed be revived so that new employment should be generated.

About landing rates, he said that new rates “are up to you and your bank. If you are a good client of the bank it may give you finance at very low margin of 4 to 6 percent. But if your track record in not fine the bank might charge higher rate.”

He said that the banks have enough liquidity to finance any project.

Due to change in policy now around 95 percent new loans are well performing loans, whereas previously there were 25 to 30 percent non-performing loans.

The SBP governor said that SBP has made it compulsory that banks should have at least Rs 500 million to Rs one billion banking capital.

Now those banks, which are not financially sound, are selling their banking licence

He said that an 'export bank' will soon be established to cater the needs of exporting sector.

Jaffer Kudia, chairman of banking and insurance sub-committee of KCCI, said that banks are reluctant to accept currency notes having any mark of pen on it.

In this connection banks are claiming that SBP has clearly instructed them not to accept such notes.

Welcoming the guests, Nasser Hyatt Maggo, President of KCCI, said that the government and the country was bound to face the fallout of US aggression against Iraq, as exports have already started to depict the signs of strain.

The exporters would also face the potential loss of export orders.

The war risk insurance and higher shipping cost would further render exports costlier.

The flow of home remittances and investment would also receive setback.

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