New Measures Wil Augur Well for Banking Industry
Jaffery, Sabir Ali, Economic Review
Mr. Abu Saeed A. Islahi, President. National Bank of Pakistan first did his MBA from Karachi University in 1963 and later as Fullbright Scholarship from Kent State University, USA in 1965. He hails from a well-known family of the sub-continent and brings to his credit 50 years of outstanding career in commercial as well as investment banking. He worked in USA. UK, Kuwait and Saudi Arabia for over 12 years besides his earlier stint in investment banking with a well reputed US firm and later on with ICP. He worked for an international bank in London and New York from 1976 to 1980 as its Merchant Banking Chief. He joined Pakistan Banking Council in 1984 as EVP and was responsible for major restructuring and privatisation of public sector enterprises. He served National Bank of Pakistan as Head of the International. Treasury and Customer Services Divisions since 1989. and as Provincial Chief, Punjab until elevated to the office of President in December 1996. Mr. Islahi expresses views on vital issues encountering banking industry in Pakistan and suggests measures for improvement. ER conducted an exclusive panel interview of Mr. Islahi. The panel was led by Mr. Sabir Ali Jaffery, himself a veteran banker. Following are the excerpts:
Economic Review: The national economy is suffering from all sorts of odds, and various reformatory measures are being prescribed. What remedy do you suggest. both short-term and long-term?
Abu Saeed Ahmed Islahi: I, obviously, would like to view the situation with a banker's view. Inspite of confusion and anxiety government is planning long-term measures to sort out problems of banking industry in general terms and nationalised banks in particular. The government is expected to issue an ordinance shortly which will empower the State Bank of Pakistan to monitor and supervise the performance of nationalised banking industry. This would augur well for the banking industry. In the past the banking sector had been the victim of all sorts of pressures that created mismanagement and uncertainty. As you know banking industry basically needs confidence of the clients. If the confidence of the clients and members of the business community is shaken-up the banking industry can't progress. I wish what we have heard so far is true and is implemented in letter and spirit, I feel that the banking industry, for the first time after so many years, will see a successful future and will also deliver to this country a banking free from burden of bad debts which in fact is a tax on honest depositors. It would usher a new era in banking industry.
ER: What is the root-cause of financial indiscipline in our banking industry?
ASAI: There had been too much government interference and enormous amount of political pressure in the past. The banking industry was ruled by informal channels. There had been frequent changes in their management boards. That has not done well to our banking industry. If the government corrects the situation I am confident that Pakistan which is proud to have produced outstanding bankers would come-up to the expectation of our country.
ER: The most serious charge against banking industry refers to high rate of defaults and low pace of recovery. Have you any specific plans to arrest this trend, and restrict defaults to barest minimum in future?
ASAI: So far National Bank of Pakistan is concerned, we have a very manageable non-performing portfolio. A part of this has been recovered. If legal system helps us we would start a campaign. We are confident that NBP would atleast recover a great deal of non-performing portfolio. If the textile industry which has been under great deal of recession comes out of this recession and starts performing it would put atleast our 50 per cent portfolio on a performing basis. With the better performance of the textile sector I am confident that our stuck-up advances would start declining very rapidly.
ER: In the wake of privatisation of all banks which is on the cards. …