Bank Al­baraka given un­due ex­ten­sion to meet MCR dead­line

The Pak Banker - - FRONT PAGE -

State Bank of Pak­istan (SBP) has ap­par­ently given an un­due ex­ten­sion to Bank Al­baraka Lim­ited for meet­ing its dead­line of paid-up cap­i­tal re­quire­ment at Rs 10 bil­lion by 2016-end, which was 2014 and 2015 by a ma­jor­ity of a mid-tier and small banks op­er­at­ing in Pak­istan.

Ac­cord­ing to bank's fi­nan­cial re­port, it has been al­lowed to main­tain a paid-up cap­i­tal re­quire­ment of Rs 6 bil­lion free of losses at all times and will have to meet the stan­dard re­quire­ment of Rs 10 bil­lion by end of 2016.

The bank planned to raise the cap­i­tal for­eign cur­rency debt of $11 mil­lion as a short-term ar­range­ment from its ma­jor spon­sor which is Al­baraka Is­lamic Bank BSC. The said sub­or­di­nated debt is sched­uled to be de­posited to the cen­tral bank as non-re­mu­ner­a­tive de­posit. This de­posit will be not be with­drawn till the bank is achieved the re­quire­ment of full MCR till the set dead­line. How­ever, it needs to re­ceive ap­proval of the cen­tral bank in case it wants with­drawal of the de­posit with SBP.

Ac­cord­ing to of­fi­cial source, the bank's de­posit will be con­verted into paid-up cap­i­tal if the with­drawal are not made by the bank till 2016-end.

Though, the cen­tral bank eased off its limit of MCR to the bank but it asked the bank to main­tain a CAR lim­ited of 16 per­cent till it main­tains its paid-up cap­i­tal re­quire­ment of Rs 10 bil­lion. The CAR will be re­duced af­ter­wards the con­di­tion is met by bank. On the con­trary, the bank fail to meet its CAR which is cur­rently stand­ing at less than 16 per­cent.

In 2015, the ma­jor spon­sor Al­baraka Is­lamic Bank (BSC) in­jected $8.5 mil­lion in the bank dur­ing 2015. This is ad­di­tion to the injection of $11 mil­lion made in 2013. De­spite of all out ef­forts by an Is­lamic Bank, it failed to meet manda­tory re­quire­ment of cen­tral bank and the bank­ing in­dus­try of Pak­istan which has been met by ma­jor­ity of the bank due to strict com­pli- ance or­der. Many of the bank raised their right shares and at­tracted injection from for­eign in­vestors. One of them was KASB Bank also which could not guar­an­tee to cen­tral bank but do­ing its ef­forts for the same. How­ever, the cen­tral bank in a merger deal handed over op­er­a­tions and de­posits of KASB Bank to Bank Isalmic. In the case of Bank Al­baraka, the cen­tral bank was see re­laxed sur­pris­ingly hav­ing merely a guar­an­tee and a fi­nan­cial plan of the bank sub­mit­ted to the bank­ing reg­u­la­tor.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.