Banks earn Rs5.3bn illegally: report

KARACHI: Banks illegally earned Rs5.3 billion in 2012 by misdeclaring the transactions being made as remittances, and the State Bank of Pakistan (SBP) kept accepting the false claims of banks, said 2013-2014 audit report of the accounts of public sector enterprises. Banking sources said that no penalty was imposed on banks; neither any disciplinary action was taken to punish them for fraudulent income. They said some major banks were also involved in this illegal business. During the audit of SBP, Banking Services Corporation (SBP-SC) accounts for the year 2011-12, it was observed that the management reimbursed an amount of Rs5.357bn to various banks on account of telegraphic transfer charges against home remittances sent by Pakistani residents abroad through banking channels, said the report. “The banks fraudulently split the transactions into $100 of same individual on the same date to avail undue benefits of 25 Saudi Riyals for each transaction,” said the report. “Further details of total split transactions were not provided to the audit,” said the report. To encourage banks and to boost remittances, Pakistan Remittance Initiative (PRI) was jointly launched by the State Bank, Ministry of Overseas Pakistanis and Ministry of Finance in 2009. In January 2010, the State Bank issued a circular saying the government through State Bank will reimburse 25 Saudi Riyals equivalent in PKR per transaction to banks in Pakistan provided that it is home remittance with value equivalent or more than $100. The distribution bank and the overseas entity share the reimbursed amount as per their mutually agreed term. The report further stated that the matter was reported to the SBP on April 18, 2013. In its reply, it stated the banks would be penalised for split transactions under the revised standard operating procedure in future. “The reply was not tenable as recovery could not be made,” said the audit report. It further said the commission income of the SBP for the year 2012-13 decreased by 9.9 per cent and exchange gain decreased by 84.4pc from last year 2011-12. The steep fall in the exchange gain of Rs6.7bn during 2012-13 as against Rs42.8bn during 2011-12, needs to be elucidated, said the report. It further said that other operating loss was Rs1.02bn during 2012 compared to operating profit of Rs9bn requires explanation. “The State Bank’s share of loss payable under profit and loss sharing arrangement amounting to Rs2.4bn needed to be explained,” said the report yet to be published. Published in Dawn, June 28th, 2014