950829

HBL defaulters

invited to negotiate

loan restructuring

SHAHID MALIK

LAHORE: President of Habib Bank Limited, M Yunus Dalia has made a categorical offer for negotiations to restructure stuck up loans which, according to him, had stemmed mainly from the bank's involvement in the textile sector, an area facing a crisis due to "constant crop failure."

Addressing to members of the local business community at the Lahore Chamber of Commerce and Industry (LCCI), he emphasised the need to avoid the time-consuming process of litigation and instead offered to accommodate genuine financial difficulties, including mark up concessions. "In accordance with the instructions of Prime Minister Benazir Bhutto, we have every intention of accelerating efforts for recovery of loans, but I am all out to help the defaulters during the current bad patch," he said.

Yunus Dalia said that his strategy was in line with the track record of his premier banking institution "studded with landmark achievements" at a time when there was a complete vacuum in the banking sector of the newly-born state of Pakistan. It would not be fair, therefore, to compare the performance of the HBL with that of the private or foreign banks, which, he said, handled only a handful of clients and did not contribute significantly to the socio-economic development of the country.

Eulogising the role of the nationalized commercial banks as service functionaries rather than profit-taking institutions, he said it was with this objective in view that the HBL had been providing banking service" at the door step of the clients by opening up branches in rural and unbanked areas." In order to ensure delegation of authority at appropriate levels, the provincial headquarters were now replaced by nine regional offices, with yet another regional headquarters at Gujranwala in the offing, for which the proposal was being considered by the Pakistan Banking Council, he revealed.

During the question-answer session after the speeches, however, Yunus Dalia refused to be drawn into a controversy on the possible change in the service functionary's role of the HBL, once the bank has been privatized in keeping with the government's declared policy. He said the NCBs besides having lion's share in the overall lending of the private sector was also playing a major role in the implementation of the government's directives in respect of achievements in agriculture and small loans mandatory targets, meeting the credit requirements under various official schemes and also rendering auxiliary services like accepting utility bills. Questioned closely on the bank's post-privatization posture with regard to its involvement in these services, he said "only time will tell what the situation will be like," cautiously adding, "Dalia will continue to serve you even when the bank has been privatized."

Earlier, in his address of welcome, the LCCI President, Mian Tariq Saeed Sehgal noted with satisfaction that, according to the Almanac of international banks, the HBL, with 1868 branches and around 30,000 employees ranked 425th among the world's 3000 leading banks and had 30 percent share in the total deposits of the country and over 35 percent share in the total advances made. The assets of the bank so far amounting to Rs 306.85 billion, he said the statistical presentation spoke for the magnum contribution of the HBL in the Pakistani banking. But in his own words, he made "a somewhat scathing attack" on Habib Bank, whose return on investment, return on equity and net profit margin was 0.1 percent, 2.5 percent and 0.9 percent respectively in 1994 against the tally of 1.28 percent, 20.25 percent and 15.2 percent in respect of the private sector Bank Al-Habib Limited.

Tariq Saeed Sehgal also criticized the HBL's mark up rates, which at 22-24 percent on working capital loans, along with 1 percent excise duty, showed an increase by about 40 percent over the last two years. "On the other hand, your offerings to the depositors is between a range of 6 to 15 percent" with the result that "in most of the cases, your inflation adjusted deposit rates are negative," he observed.

Concluding the deliberations though, the HBL president clarified that while their make up rates were not uniform for all the clients, the charges were not as high as claimed but in the range of 18 percent on an average. "The mark up rate is also corelated to the quantum of business passed by the borrowers and the advances being productive in nature, the borrowers are also expected to pass on their ancillary business to the lending bank, and so the mark up rate is determined accordingly," he added.