KARACHI: Enforcement actions in the April-June quarter against six banks by the State Bank of Pakistan (SBP) resulted in penalties worth Rs350.8 million, up 167 per cent from a year ago.

The central bank takes “supervisory enforcement actions” when banking entities become non-compliant with regulations. It usually imposes penalties but may also resort to “administrative and financial sanctions” in addition to seeking help from law enforcement and prosecution bodies.

Data released by the SBP on Thursday showed the number of erring banks doubled on a yearly basis in April-June. The cumulative amount of the fine in the three-month period went up 56.6pc from the preceding quarter, which saw enforcement actions against five banks, data showed.

The biggest penalty was imposed on National Bank of Pakistan Ltd (NBP), which was in violation of regulatory instructions pertaining to customer due diligence/know-your-customer (KYC) as well as asset quality, which is reflective of credit risk on loan and investment portfolios. The amount of penalty on NBP was Rs144.2m.

Bank Alfalah Ltd received a penalty of Rs125.2m for the violation of regulatory instructions about anti-money laundering/counter-financing of terrorism, customer due diligence/KYC and foreign exchange and general banking operations.

The other four banks that received penalties during the last quarter from their regulator were Meezan Bank Ltd (Rs38m), Allied Bank Ltd (Rs20m), Punjab Provincial Cooperative Bank Ltd (Rs12.2m) and Bank AL Habib Ltd (Rs10.4m).

“These actions are based on deficiencies in the compliance of regulatory instructions and do not constitute a comment on the financial soundness of these entities,” said the SBP’s Offsite Supervision and Enforcement Department.

Relief for consumers

While the SBP imposes “monetary penalties” on banks for violating regulations, the office of the Banking Mohtasib Pakistan (BMP) provides “monetary relief” to banking customers mainly for the wrongs they suffer at the hands of fraudsters.

An independent statutory body set up to resolve disputes between banks and their consumers, the BMP provided relief amounting to Rs330.5m to clients by disposing of 6,426 complaints against commercial banks in April-June.

The BMP received 7,030 new complaints, including 1,882 from the Prime Minister’s Portal from April 1 to June 30. The number of outstanding complaints with the BMP at the end of April-June was 10,455.

More than one-fifth of the complaints belong to internet banking. Other major complaint categories are frauds (17pc), ATMs (10pc), service inefficiency/delays/staff misbehaviour (13pc), account-related (11pc) and debit/credit card (9pc).

Published in Dawn, July 28th, 2023