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HBL may not fetch best price: Tarin

RECORDER REPORT

KARACHI: Shaukat Tarin, former President of Habib Bank Ltd, has said that the bank is ready for privatisation but it may not fetch the best price due to the prevalent market conditions.

Speaking at a meeting of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) here on Thursday, he suggested that the bank should be divested as a whole, both local and foreign branches together. It might be a joint venture between local and foreign parties and a portion of its share, say 20 percent, might be sold through stock exchange as was done in India. However, the professional management of the bank might be kept intact and the restructuring work be continued, he advised.

In reply to a question, he said that the bank's actual defaulted amount in 1997 was Rs 250 to Rs 300 billion but was shown as Rs 146 billion. Similarly the balance-sheet showed over the table default of Rs 42 billion although the actual amount was around Rs 70 billion. Since the actual amount of default was not made public it looked as if the defaulted amount had increased from Rs 146 billion to Rs 210 billion despite the recovery and rescheduling of defaulted loans.

He said that although the action taken by the National Accountability Bureau (NAB) has made the wilful defaulters realise that the government was serious in its recovery drive but said that this was an on-going legal system to deal with the problem.

He said that the country needed a bankruptcy law and a judicial set-up to act promptly and efficiently.

He said that about 80 percent of the bank's bad loans pertained to project financing because the banks never looked at the cash flows of the borrowers. Now the situation was changing as project cells were being activated in the banks, he said.

He agreed with the suggestion of the FPCCI president that the banks' lending rate should be further reduced and said that the rates could come down by five to six percent.