ISLAMABAD: SBP amendment and IDBP Conversion Bill, 2010 are passed with some major changes in the first bill; however, the second bill was passed for converting IDBP into public limited company.
SBP amendment bill was approved by Senate after having some major changes recommended by Senate’s standing committee on Finance. It has also given its approval for Industrial Development Bank of Pakistan (Reorganization and Conversion) bill 2010.
The Senate body, in reference to the SBP bill, suggested that in order to limit government borrowings from SBP, some meaningful legislation should be formulated. This legislation would also ensure that these borrowings were repaid. The Monetary Policy Committee should be replaced by a Central Board having professionals from all provinces. The committee unanimously decided to omit clauses 3,6,7,9 and 14 of the bill. The committee also suggested that Government should be made accountable to parliament for any additional borrowings. In case the borrowings were not paid within the Time frame decided, the Finance Minister would be responsible to present its justifications before the parliament. However, the chairman of the Senate Committee Mr. Ali commented that failure should be ratified by the parliament as it would ensure timely repayments. Eight years time period from the date of commencement of this act was recommended for the retirement of outstanding stock of the federal government borrowings.
The Committee further recommended formation of a Central Board as a replacement of monetary policy committee having representation of professionals from each province and also from SBP. At least one director from each province is recommended to be included in the Board. The Committee also proposed to retain the old Fiscal and Monetary board to keep Country’s monetary and fiscal policies connected.
In our opinion, if implemented properly, this would help in controlling Government borrowings. But on the other hand this might also cause slowing down the administrative and other expenses of Government for running its operations smoothly ( which are covered thru’ these borrowings).
The major reason given by the committee for amendments was that SBP Act, 1956 was an old law and new amendments are needed to bring it near to the concepts & regulations of the modern banking.
The IDBP bill was presented before senate for its reorganization and conversion into public limited company. The above bill was presented in 2009, in order to repeal the IDB ordinance 1961. The IDBP was established to provide credit facilities to industrial sector. IDBP is wholly owned by Government of Pakistan.
57% of its shares are held by Federal Government, 36% by SBP and 7% by Provincial Governments and other Public sector corporations. Its Board of Directors is appointed by Ministry of Finance, GoP.