FIA intervenes after commercial banks refuse to extend credit limits to WTOs and refineries

ISLAMABAD: After commercial banks showed their reluctance to extend credit to Petroleum Marketing Companies (OMC) and refineries, the Federal Investigation Agency (FIA) stepped in and provided support to commercial banks to carry out banking operations with the WTO.

Following an investigation by the FIA ​​against National Bank of Pakistan (NBP) executives allegedly involved in facilitating M/S Hascol Petroleum Limited with dishonest intent, the banks refused to extend the limits credit to WTO, refineries in the country . However, the FIA ​​has now stepped in and assured commercial banks that the agency’s investigation should be of no concern to those not guilty of misconduct or breach of trust.

Amir Farooqi, Director of FIA, in a letter dated March 18, 2022 to the presidents of all commercial banks in Pakistan regarding the review of banking operations with Petroleum Marketing Companies (OMCs), said that FIA Sindh Zone I was conducting a criminal investigation against National Bank of Pakistan (NBP) officers who are civil servants/bankers involved in facilitating M/S Hascol Petroleum Limited with dishonest intent resulting in the loss of billions of rupees to the bank by criminals fraudulent practices.

According to a letter from the director of the FIA, the investigation so far reveals criminal negligence on the part of the bank to follow prudent banking practices. The fundamental objective of the investigation is to determine the responsibilities and secure the conviction of those involved in criminal acts. Further, to avoid the risk of avoidable loss to the public purse in the future, and at the same time, to raise the bar for due diligence and regulatory review/oversight in the appropriate forums.

Recently, this agency has been informed that banks are hesitant to do business with OMCs, apparently due to the aforementioned investigation underway in this agency.

In this regard, it is to reassure that this agency fully supports all efforts by the banking industry to undertake any restructuring of its exposure to HPL as it deems fit in accordance with the law,” the letter from the FIA ​​states.

“This agency also unequivocally assures all concerned that this investigation has been and will continue to be conducted to the highest professional standards and should not be cause for concern to those not guilty of misconduct or of breach of trust,” reads the letter from the FIA.

According to sources, the current total working capital facilities available with Parco are Rs 144,550 million, NRL Rs 105,850 million, PRL Rs 51,550 million, CPL (Cnergyico Pk Limited) Rs 46,550 million and ARL Rs 3,000 million.

It should be noted that the Petroleum Companies Advisory Council (OCAC) had previously written a letter to the Governor of the State Bank of Pakistan (SBP) and requested intervention after the banks refused to extend credit limits to OMC /refineries. OCAC also warned Governor SBP that banks’ reluctance to extend funding facilities to WTOs and refineries could lead to an oil crisis in the country.

It is pertinent to mention that President Arif Alvi has so far granted sanction for the placement of Rs 20 billion in the allotment account for reimbursement of Price Differential Claims (PDC) of Petroleum Marketing Companies ( WTO) and refineries.

In a letter dated March 18, 2022 to the Accountant General of Pakistan, the Petroleum Division conveyed the President’s sanction to the placement of Rs 20 billion in the allotment account titled Reimbursement of Price Differential Claims (PDC) from Marketing Companies petroleum (OMC) and refineries

“It is requested that the Director of National Bank of Pakistan, Main Branch, Karachi may be requested to arrange payment against the ceiling of Rs 2 billion upon receipt of checks and prescribed payment schedule duly signed by authorized signatories of the account,” said a letter from the oil division.