ISLAMABAD: National Bank of Pakistan (NBP) has started legal proceedings against M/s Hascol Petroleum Limited (HPL) for obtaining credit facility of Rs 23.866 billion as Auditor General of Pakistan is of the view that the Bank’s management unjustifiably granted financing facilities.
This has been disclosed in audit report FY 2023-24, the para ” loss due to granting financing/ credit facilities to the company involved in fraudulent activities- Rs 23,866.381 million’ shared with National Assembly.
Audit has explained that clause 9.12.5 of Chapter 9 of Credit Management Policy of NBP requires that an important component to be assessed in credit investigation process. It involves determining respectability, reputation and commercial integrity of the borrower i.e. borrower’s relationship with the supplier/ customer and commitment towards satisfying the trade related obligations and debt repayment and CPB clause 14.72 requires discussing major suppliers and major customers (buyer) in credit proposals.
During audit of National Bank of Pakistan (NBP) Head Office, Karachi for the year 2022, it was observed that the management extended various financing / credit facilities without keeping in view the relevant prudential regulations while granting such facilities to M/s Hascol Petroleum Limited, without assessing its financial worth.
The audit has observed following irregularities
(i) personal and corporate guarantees held by NBP as security were removed and un-tagged without clearance/adjustment of loans in credit committee 613th meeting dated November 21, 2017
(ii) SEVP, corporate banking group recommended and allowed routing of credit proposal through his own group instead of routing it through investment banking group
(iii) Group chief CIBG recommended and allowed additional running finance facility of Rs 1,000 million vide credit committee meeting 613th on November 21, 2017 HPL against the security of stocks and receivables that were already encumbered against LC lines
(iv) instead of reducing exposure, aggressive exposure was allowed to the company despite oil industry was facing many challenges in 2018 and decline in profitability of most of oil refineries and OMCs at that time including HPL, increased letter of credit facility from Rs 12,000
million to Rs 18,000 million on October 01, 2018
(v) allowed charge up-gradation deferrals and opening of LC in presence of overdue FATR/FPADS (forced payment against documents) ;(vi) allowed restricting facilities i.e. conversion of short term facilities into long term facilities
(vii) allowed and converted defaulted LCs of Rs 8,000 million to long term loan and LC line was reduced to Rs 10,000 million from Rs 18,000 million
(viii) again, allowed opening of LCs in presence of overdue to utilize full LC limit of Rs 18,000 million just lapse of about one month
(ix) condition of maintaining FPADS at the level of Rs 8,000 million for restricting was also relaxed
(x) subsequently management filed a lawsuit No. B-47 of 2022 against the defaulter in the High Court of Sindh.
The FIA has submitted challan against 11 officers in the law Court, whereas 08 officers resigned from NBP before the case surfaced and received all end service benefits.
Audit is of the view that the management unjustifiably granted financing facilities and extended undue favor to the involved officers which needed to be probed at highest level. The matter was reported to the management on October 23, 2023. The irregularity was discussed in the DAC meeting held on January 23 & 24, 2024. The management informed the DAC that disciplinary action against the concerned employees were under process and legal proceedings against the company were started. DAC directed to take action against the involved employees of NBP and pursue the legal case properly for recovery of amount and share inquiry report with Audit. Audit has recommended implementation of the DAC directives.
