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Corporate governance in banking

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According to a Press release, which was officially released by Banking Mohtasib Pakistan (Ombudsman), that 11,732 complaints have been received in his office in the first quarter of 2021, it is 135 percent high as compared to the previous year’s same period, which was 4994. It is a high level in increase of complaints against commercial banks from banking consumers. This has been also mentioned that 132.62 million rupees have been recovered from commercial banks as compensation for consumers.
Although it is a big question regarding corporate governance in banking sector of Pakistan, but I was surprised more when I saw the details of penalties from State Bank of Pakistan to the commercial banks. All details are available on the website of State Banks of Pakistan. More than 2200 million rupees have been received as fine from the commercial banks during 2020.

SBP more than 2200 million rupees have been received as fine from the commercial banks during 2020.

During the first quarter Jan-May 2020, an amount of 12.800 million rupees fine was imposed on HBL. In the second quarter Apr-June 2020, UBL 137.001, JS Bank 71.417, Meezan Bank 81.060, Faysal Bank 96.128, Bank of Punjab 286.333 (highest in this period), Habib Bank 204.217, MCB 158.474, NBP 269.810.
Bank Al-Habib 46.802, Habib Metro 22.805, Bank Al-Falah 40.305, Askari Comm 29.814, Bank Islami 11.517, Punjab Provision Co-operative Bank 81.500, Zari Tariqiati Bank 147.250. These all fines are in millions of rupees. This quarter was the worse for banking sector.

During the first quarter Jan-May 2020, an amount of 12.800 million rupees fine was imposed on HBL. In the second quarter Apr-June 2020, UBL 137.001, JS Bank 71.417, Meezan Bank 81.060, Faysal Bank 96.128, Bank of Punjab 286.333 (highest in this period), Habib Bank 204.217, MCB 158.474, NBP 269.810.
Bank Al-Habib 46.802, Habib Metro 22.805, Bank Al-Falah 40.305, Askari Comm 29.814, Bank Islami 11.517, Punjab Provision Co-operative Bank 81.500, Zari Tariqiati Bank 147.250. These all fines are in millions of rupees. This quarter was the worse for banking sector.

All fines were imposed because irregularities found at high levels, there were also procedural violations. All actions have been taken by panel and warned to strengthen its process. Third quarter July-Sept, 2020 was quite low because the fine imposed on four commercial banks, there were, Bank Islami 116.269, Soneri Bank59.234, Bank of Punjab 10.00 and Al-Barka Islamic Bank 86.119 million in Pak rupees.
The last quarter of the year was bit low, only unfortunate bank was Habib Metro the penalty imposed 59.516 million in Pak rupees. It also becomes the violation of instructions. The bank has been advised to conduct an internal inquiry as well.
All above details are an open evidence that the enforcement action department of State Bank of Pakistan is vigilant and it should be more. Actually, these fines are could be the real loss of account holders or the consumers of commercial banks.
The question arises that why the corporate governance in banking sector of Pakistan is so poor and the ignorance and negligence in the system. The answer is very simple that there is a political influence and sethia business style in Pakistan. So, the Board of Directors have no professional approach, according to the requirement of the market, because of the poor corporate governance, fake account holders were found in two commercial banks (falooda wala and paper wala etc.), Summit Bank and UBL are two major examples. So, it’s unfortunate that the corporate governance in banking sector is not improving as required.
We all know the main features of corporate governance. First, the transparency in operations while the accountability becomes second and the last but not the least is the fairness in dealing. We all remember the case of Khadim Ali Shah Bukhari Bank. How it was handled, technically and politically. Mehran Bank scandal was also handled politically. The recent example areHBL New York Branch, where heavy penalties were imposed and the National Bank case in Bangladesh, where operations have been suspended due to violations. Right now, some presidents of Commercial Banks are facing the cases in NAB

State Bank of Pakistan is promoting Islamic banking but there is need to introduce Islamic banking courses in universities. Shariah book should be represented all fiqhs and Islamic school of thoughts, it will improve the products and services.

It is a matter of displeasure that in most of the banks, there are lobbies in employees where unhealthy practices are going on. Government is trying to improve the workforce to empower the women, but so-called lobbies are the major hurdles to improve the number of professional and talented females in financial sector. Pakistani woman is facing the huge problems, whether she is working or trying to be a member of earning bread and butter for her family.
Although in urban society, there are opportunities but in rural society, there are a lot of difficulties, even in corporate sector. First Women Bank was as good initiative for women empowerment by then first women prime minister Mohtarma Benazir Bhutto but because poor corporate governance. Now this institution has been considered as liability.
How we can improve the situation, this is the big challenge for corporate sector, especially in banking. The performance of human resource departments in corporate sector is very much poor. I have observed an HR Department of a commercial bank, where they are always busy to conduct written tests and interviews for new comers, but actually it’s an eye wash. In fact, they have a policy to pick and choose according to the will and wish of powerful internal lobbies or sethes approval.
So they are not honouring the talent and professionalism. There are some pocket unions, which are more powerful than Board of Directors. So, the result is obvious. As we know there are banking academies and banking institute but even then, need to promote professional studies during job as well.
State Bank of Pakistan is promoting Islamic banking but there is need to introduce Islamic banking courses in universities. Shariah book should be represented all fiqhs and Islamic school of thoughts, it will improve the products and services.
Most of the account holders donot know, what the hell is going on, where he or she have trust to deposit his/her savings.
The state bank of Pakistan should publicise the violations of commercial banks in Urdu, English and regional language newspapers, on the end of every quarter.
This could be the best way to evaluate the services and credibility of banks. This publicity can also helpful to improve the corporate governance in banking.
We should not ignore the consumers because they are the actual stakeholder of every market or business sector. If the consumers are satisfied then your organization can flourish by leaps and bounds.

The state bank of Pakistan should publicise the violations of commercial banks in Urdu, English and regional language newspapers, on the end of every quarter.