ISLAMABAD: A parliamentary panel on Tuesday asked the government to offer at least one-year tax amnesty to people earning less than Rs1.2 million per year to fight adverse economic effects of Covid-19 and inflation, and advised the central bank to do away with inter-bank fund transfer (IBFT) charges by banks to encourage digitisation.

The Senate Standing Committee on Finance and Revenue, headed by Senator Talha Mahmood, also asked the State Bank of Pakistan (SBP) to avoid stigmatising politicians under the terms “politically exposed” persons under which banks discriminated against certain sections of society, including lawyers, judges and politicians, as if they were involved in money laundering, terror financing and corruption, etc.

The committee’s meeting also noted with concern a lack of integrity among audit firms and legal deficiencies stopping the regulators from taking timely action against misreporting of financial statements by listed companies when the panel was informed that Hascol Petroleum had suffered about Rs53 billion losses in the short span of a year with a Rs53bn financial exposure of banks, including Rs19bn of the National Bank of Pakistan (NBP).

The committee asked the SBP to do away with IBFT charges because it discouraged digitisation and documentation. “This is a punitive action against the poor and should be abolished and a compliance report be submitted within a month,” the committee recommended.

SBP’s Deputy Governor Jameel Ahmad explained that the central bank had directed banks to provide free of cost digital fund transfer services to individual customers up to a minimum aggregate sending limit of Rs25,000 per month per account. This will allow individual customers to make as many free fund transfer transactions remaining within their aggregate monthly limit of free transfers.

However, for transactions above the aggregate limit of Rs25,000 per account in a month, banks may charge individual customers a transaction fee of no more than 0.1pc of the transaction amount or Rs200, whichever is lower. This will enable service providers to recover part of costs they incur on providing inter-bank fund transfer service and build sustainable and innovative business models.

Mr Ahmad said all digital fund transfer transactions between different accounts within the same bank (intra-bank fund transfers) would remain free. The incoming inter-bank fund transfer transactions will also remain free.

The SBP official said data available for July 2021 and 19 days of August showed that number of IBFT transactions had increased.

The committee, while discussing the Hascol’s financial crisis, noted that the company’s share price had dropped from Rs300 per share to Rs7.80 per share in less than two years, affecting the common shareholders as 19 banks had unfunded liabilities of about Rs53bn against Hascol. The committee ordered a forensic audit of the Hascol accounts and transactions in addition to the ongoing investigation by the Securities and Exchange Commission of Pakistan.

The committee was unanimous that the matter related to public fraud should be proceeding against under criminal acts but audit firms should also be proceeded against under criminal offences for allowing repeated restatements of annual financial statements. The panel members believed that the audit reports were behind the banks taking long-term loans while common shareholders trusted the regulators and financial results which had no integrity.

The committee was told that Hascol had defaulted in repayment of loans and banks had classified most of their exposure and created provisions of Rs39.34bn. As of June 30, 2021, the NBP has the highest outstanding exposure of Rs18.824bn while the Habib Bank Limited has the second largest exposure of Rs5.44bn.

The SBP representatives said the central bank had looked into the matter and had found no wrongdoing on part of the banks and financial sector regulator and it ensured that banks made proper provisions for outstanding loans so that the financial system remained stable and banks’ depositors unaffected.

The SECP reported that last publically available financials of Hascol were as of September 30, 2020. In view of non-disclosure of subsequent financial statement and non-holding of annual meetings, the stock exchange had already put the company on defaulters list.

Moreover, even the financials as of September 30, 2020 cannot be relied upon as the company’s internal audit received a whistleblower statement and evidence regarding creation of a series of false purchase orders in 2019 and the position is being investigated. The SECP said the company repeatedly changed in financials and even the origin of its oil imports.

In a meeting with the banks’ representatives held on April 30, 2021, the newly appointed Hascol board Chairman, Alan Duncan, a British politician, alleged that the previous Hascol management was atrocious and had misused the trust, did not maintain proper records and ran the business unprofessionally.

The committee was told that in the presence of huge negative equity of Rs29.54bn as per latest available financials as of September 30, 2020 and expected further deterioration in the subsequent periods, the revival of Hascol appeared beyond the capacity and the intention of the major shareholder M/s Vitol alone.

The SECP said its investigation was earlier hampered by stay orders which had now been vacated and it would now complete the investigation in about one month. It requested the committee not to expect quick outcome of investigation otherwise this may lead to relief in courts to Hascol. The investigation will then be followed by civil or criminal proceedings and restructuring of the company to best interest of the shareholders and banking sector.

Published in Dawn, August 25th, 2021