Sindh Bank's mounting losses amidst banking industry prosperity
While the entire banking industry in Pakistan has thrived, with
substantial profits, one exception stands out—Sindh Bank Limited (SBL). SBL
incurred staggering losses of approximately Rs29.15 billion from 2018 to 2023.
This financial decline is attributed to a series of bad loans granted to
fictitious accounts and non-performing loans associated with a specific
business group closely tied to a political party.
The bank, which reported a profit of Rs13 billion from 2011 to
2018, teetered on the brink of bankruptcy from 2019 to 2023. Documents obtained
by The News reveal that the Sindh government, as the major shareholder of Sindh
Bank, concealed these losses resulting from bad loans to the group. The
provincial government consistently infused Rs23.7 billion in equity from
taxpayer funds to bolster the deteriorating Capital Adequacy Ratio (CAR) from 2019
to 2023.
Interestingly, during the bank's substantial losses and reliance
on public funding to meet its CAR requirements, it wrote off loans worth
millions of rupees for family members of the group, according to documents.
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In 2018, the Supreme Court of Pakistan initiated suo motu
proceedings related to alleged fake accounts and money laundering, linking the
entire affair to a political leader and their close associates. In a judgment
dated January 7, 2019, the apex court ordered the National Accountability
Bureau (NAB) to conclude the investigation within two months and file a
reference in the relevant accountability court.
The official records show that the Sindh Cabinet allocated a
budget of Rs11.7 billion and Rs3 billion in June 2019 to address Sindh Bank's
capital shortfall. Similarly, the provincial cabinet approved an additional
equity injection of Rs4 billion to bolster the bank's deteriorating Capital
Adequacy Ratio (CAR).
Despite the substantial losses over the past four years and
considerable equity injections by the Sindh government, the bank's losses
continued to mount. Just before the conclusion of the PPP government's
five-year term, the provincial cabinet approved another equity injection of Rs5
billion in June 2023.
Documents indicate that on July 27, 2023, the Sindh Cabinet
convened a special meeting to brief its members on banking issues related to
Sindh Bank. The bank's Chief Operating Officer (COO) presented a detailed
performance report for the past five years during the meeting.
Official records indicate that the bank filed 106 criminal and
civil suits, claiming Rs36.9 billion, in various courts. However, the bank only
managed to recover Rs3.1 billion from these non-performing loans during 2019 to
2023.
Source: The News