Proposed law provides blanket indemnity to SBP top guns

Published March 26, 2021
The government has proposed drastic changes in the existing SBP Act, 1956. ─ Wikimedia Commons/File
The government has proposed drastic changes in the existing SBP Act, 1956. ─ Wikimedia Commons/File

KARACHI: A proposed bill, which the government claims is aimed at making the central bank autonomous, will practically provide immunity to top officials of the State Bank of Pakistan as no investigating agency, including the anti-corruption watchdog NAB, can initiate any action against them without obtaining permission from the board of directors of the bank, it has emerged.

“No action, inquiry, investigation or proceedings shall be taken by NAB, FIA or provincial investigation agency, bureau, authority or institution by whatever name called without prior consent of the board of directors of State Bank,” according to a clause in the proposed State Bank of Pakistan (Amendment) Bill 2021.

The same clause will also be applicable to SBP’s former directors, governors, deputy governors if the bill is passed into law by parliament.

While the existing rules says every [person in the service] of the Bank shall be deemed to be a ‘public servant’ within the meaning of Section 21 of the Pakistan Penal Code, the government proposed drastic changes in the existing SBP Act, 1956.

At present, central bank’s employees fall within the definition of public servant

The proposed bill says no suit, prosecution or any other legal proceeding including for damages shall lie against the bank, board of directors or member thereof, governor, deputy governors, member of any board committee and monetary policy committee, officers and employees of the bank for any act of commission or omission done in exercise or performance of any functions, power or duty conferred or imposed by or under this Act upon such persons or any rules and regulations made there under or any legislation administered by the Bank unless such act is done in bad faith and with mala fide intent.

It further says the governor, deputy governors, directors, members of any board committee and monetary policy committee, officers and employees of the bank shall not be liable in their personal capacity for any act of commission or omission done in their official capacity in good faith and in case of any such proceedings, they shall be indemnified by the bank, which shall bear all the expenses thereof, till final decision of the case.

Discontinuation of quasi-fiscal operations

Currently, the SBP is mandated to carry out quasi-fiscal operations, including rural credit, industrial credit, export credit, loans guarantees, and housing credit.

However, a proposed amendment says that quasi-fiscal operations, defined as monetary actions taken on behalf of the government, shall be discontinued.

However, refinancing facilities, which the SBP has used to support access to credit in underserved sectors, shall still be allowed.

The existing rules says the SBP secures monetary stability and fuller utilisation of the country’s productive resources. However, it has been proposed that the primary objective is the domestic price stability, secondary objective is financial stability, and tertiary objective is to support government’s economic policies to foster development and fuller utilisation of resources.

At present, the SBP is being provided with authorised and paid-up capital of Rs100 billion while a proposed amendment says the authorised capital should be Rs500bn paid-up capital (initial).

The SBP is being provided with sufficient financial resources and distribution of profits. Currently, no specific formula is to be decided with the prior approval of the government.

Another proposed amendment based on a formula to be incorporated in the SBP law says “approval of government not required”.

Currently, there is monetary and fiscal policies coordination board and under the proposed law SBP’s functional and institutional autonomy is being strengthened and mechanism for coordination between the SBP and government is being changed.

A proposed amendment in this regard says the governor and finance minister would establish liaison. The governor and the finance minister shall establish a close liaison with each other and shall keep each other fully informed on all matters which jointly concern the bank and the finance division.

Published in Dawn, March 26th, 2021

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Disregarding CCI
Updated 04 Nov, 2024

Disregarding CCI

The failure to regularly convene CCI meetings means that the process of democratic decision-making is falling apart.
Defeating TB
04 Nov, 2024

Defeating TB

CONSIDERING the fact that Pakistan has the fifth highest burden of tuberculosis in the world as per the World Health...
Ceasefire charade
Updated 04 Nov, 2024

Ceasefire charade

The US talks of peace, while simultaneously arming and funding their Israeli allies, are doomed to fail, and are little more than a charade.
Concerning measures
Updated 03 Nov, 2024

Concerning measures

The govt must seek political input and consensus on the changes it is seeking to make and be open about its intentions.
Short-lived relief?
03 Nov, 2024

Short-lived relief?

POLICYMAKERS must be jumping with joy. At the close of the first quarter of FY25, the budget posted a consolidated...
Brisk spread
03 Nov, 2024

Brisk spread

THE surge in polio cases has reached distressing levels with a tally of 45 last reported, after two cases emerged in...