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It has been observed that violations/irregularities are recurring in the case of several banks despite they being repeatedly reminded of violations/irregularities in State Bank's inspection reports. Besides a tendency has developed amongst some banks to delay action/response on SBP instructions. This situation is not acceptable from the regulatory point of view. With a view to ensuring that inefficiencies in the banking institutions are reduced to the minimum, the banking system maintains integrity and financial soundness, and the observations/irregularities pointed out by the SBP are taken seriously by banks and rectified promptly, it has been decided that, in addition to any other action that SBP may institute against any functionary of a bank of financial institution under Section 83 of the BCO, 1962, the following scale of penalties will be applicable with immediate effect in respect of various categories of violations of rules and regulations.
| Sr. No. | AREA OF IRREGULARITIES | SCALE OF PENALTY |
| a) | Violation of:- i) Cash Reserve Requirement. ii) Statutory Liquidity Requirement |
i-a) Rs 69/- per 100,000/- or
part thereof per day on the amount by which the balance with SBP falls short of the fixed
minimum. i-b) If the shortfall continues in the subsequent week or thereafter, the penalty shall be increased to Rs 86/- per 100,000/- or part thereof per day. ii) Rs 86/- per 100,000/- or part thereof per day on the amount by which the liquid assets fall short of the fixed minimum. |
| b) | Violations of instructions regarding operations of Deposit Accounts and payment of Return. | Rs 20,000/- per case and/or Rs. 1,000/- per day for the period of the irregularity, and/or disciplinary action against responsible official(s). |
| c) | Violation of instructions regarding operating of accounts. | Rs. 20,000/- per case and/or Rs. 1,000/- per day for the period of the irregularity, and/or disciplinary action against responsible official(s). |
| d) | Violation of security requirement for grant of loans and advances. | Rs 20,000/- per case and/or Rs. 1,000/- per day for the period of the irregularity, and/or disciplinary action against responsible official(s). |
| e) | Violation of instructions/regulations regarding grant of financing facilities. | Rs. 20,000/- per case and/or Rs. 1,000/- per day for the period of the irregularity, and/or disciplinary action against responsible official(s). |
| f) | Violation of rules & regulations including those relating to issuance of letter of Credit and Guarantees. | Rs. 20,000/- per case and/or Rs. 1,000/- per day for the period of the irregularity, and/or disciplinary action against responsible official(s). |
| g) | Violation of other Prudential Regulations, provisions of Banking Companies Ordinance, 1962. Banks Nationalisation Act, 1974 and State Bank of Pakistan Act, 1956. | Rs. 20,000/- per case and/or Rs. 1,000/- per day for the period of the irregularity, and/or disciplinary action against responsible official(s). |
| h) | Delayed submission of Returns, concealment or misreporting of data/information to the State Bank of Pakistan. | Rs 20,000/- per case and/or Rs. 1,000/- per day for the period of the irregularity, and/or disciplinary action against responsible official(s). |
| i) | Violation of instructions regarding location, opening and shifting of branches. | Rs. 20,000/- per case and/or Rs. 1,000/- per day for the period of the irregularity, and/or disciplinary action against responsible official(s). |
| j) | Violation of regulations regarding grant of financing facilities in respect of Export Finance Scheme/Locally Manufactured Machinery. | As already notified by State Bank of Pakistan from time to time. |
| k) | Excess lending to autonomous bodies from their prescribed limit. | As notified vide BCD Circular letter No. 27/127. Priv-88 dated 12-11-1988. |
3. It has also been decided that, henceforth, banks found to be
repeating or committing the same violations/irregularities in the following
year(s)/period(s) except those relating to Cash Reserve Requirement/Statutory Liquidity
Requirement would be subjected to levy of a surcharge @ 25% compounded on succeeding year
as compared to the year, it was first pointed out.
4. Banks are advised to note the new scale of fines/penalties as also their progress
nature and to circulate among managers of all their branches. It may also be noted that
fine/penalty once levied due to mistake in reporting or any other lapse on the part of
banks will not be condoned/refunded. Banks are therefore, urged in their own interest and
in the interest of the banking system as a whole to ensure compliance with Prudential
Regulations and other directives of the State Bank of Pakistan in letter and spirit.
5. Please acknowledge receipt.
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