Govt, WB differ over Rupali corporatisation process
Saturday, 6 December 2008
FE Report
The government and the World Bank are locked in a catfight over the future appointment of the chief executive at Rupali Bank as the global lender pushes anew for corporatising the ailing commercial bank, finance officials said last week.
The finance ministry agreed to weigh up the proposal in a cautious manner before it makes the bank a public company but stuck to its position not to spurn its authority to recruit the chief executive officer-cum-managing director at Rupali by itself. By contrast, the World Bank wants the board of the would-be corporatised bank to do the job according to the memorandum.
The Washington-based lender this month asked the country's interim administration to pursue the corporatisation of Rupali, majority controlled by the government, after a major privatisation debacle in the country's history.
"We don't agree with the World Bank's views. As the largest shareholder, the government must have authority of the appointment of the top executive at Rupali," an official said.
"The bank (Rupali) did not communicate with such a decision with us (finance ministry). And it can't take this major decision without consultation with the ministry. There are many technical issues to be dealt with before we agree on the World Bank's fresh suggestion," the official said.
Rupali's financial condition and operational efficiency have deteriorated since 2005-the year the bank was put on sale. The bank has hefty non-performing loans and huge unsecured assets.
Officials said the bank's increasing operational inefficiency was due, in part, to a freeze on the manpower recruitment since then.
The official noted that Rupali Bank, in its joint annual general meeting and extra-ordinary general meeting held in late October, decided to adopt the same memorandum as did by three state-owned banking corporations-Sonali, Janata and Agrani.
A source at the World Bank said his agency was opposed to the idea of unilateral recruitment of the CEO by the government, given the fact it would undermine the basic objective of corporatisation and allow the finance ministry to interfere in the bank's day-to-day affairs.
"In case of corporatisation, the bank's board should enjoy greater freedom and operational autonomy. Otherwise, the main objective of turning the bank into a corporation will be derailed," the source added.
After concluding a week-long mission, the WB team led by Kiatchai Sophastienphong also appeared satisfied with the post-corporatisation condition of state-owned Sonali and Janata.
But a source in the mission said the bank's team was dissatisfied with the performance at Agrani Bank.
The "bitter relations" between chairman and chief executive officer of Agrani have stood in the way of turning round the bank, the source said, thus keeping the third largest state-owned lender from harnessing the full benefits of corporatisation.
The largely state-owned Rupali was put on sale under the WB funded enterprise Growth and Bank Modernisation (EGBM) project almost four years ago.
But the government, at 96 per cent stake, had to suspend the bank divestment process early this year as the Saudi Prince, the potential buyer, backed off the deal, reneging on his promises to conclude the buyout process.
Since then the Rupali issue has become a major cause of concern for the finance ministry.
The finance ministry officials said they have to scrutinise the technical aspects of the latest WB suggestion before taking the next course of action.
The $250 million worth EGBM project came into effect in July 2004. About 58 per cent fund of the four-year project was still unutilised until 2007-08, forcing the both the sides to extend its duration for two more years.
In July 2007, the caretaker government turned three once-nationalised banks into public companies as part of the broader reform in the country's banking sector public sector.
Under the agreement with the World Bank, Somali Bank Limited, Janata Bank Limited and Agrani Bank Limited are supposed to cut back their huge bad debts piled up over decades by December next in the light of given targets.
The WB also asked the banks' boards to accelerate the process of voluntary retirement scheme in the banks in a bid to retrench some 15000 or one-third of their total manpower.
The government and the World Bank are locked in a catfight over the future appointment of the chief executive at Rupali Bank as the global lender pushes anew for corporatising the ailing commercial bank, finance officials said last week.
The finance ministry agreed to weigh up the proposal in a cautious manner before it makes the bank a public company but stuck to its position not to spurn its authority to recruit the chief executive officer-cum-managing director at Rupali by itself. By contrast, the World Bank wants the board of the would-be corporatised bank to do the job according to the memorandum.
The Washington-based lender this month asked the country's interim administration to pursue the corporatisation of Rupali, majority controlled by the government, after a major privatisation debacle in the country's history.
"We don't agree with the World Bank's views. As the largest shareholder, the government must have authority of the appointment of the top executive at Rupali," an official said.
"The bank (Rupali) did not communicate with such a decision with us (finance ministry). And it can't take this major decision without consultation with the ministry. There are many technical issues to be dealt with before we agree on the World Bank's fresh suggestion," the official said.
Rupali's financial condition and operational efficiency have deteriorated since 2005-the year the bank was put on sale. The bank has hefty non-performing loans and huge unsecured assets.
Officials said the bank's increasing operational inefficiency was due, in part, to a freeze on the manpower recruitment since then.
The official noted that Rupali Bank, in its joint annual general meeting and extra-ordinary general meeting held in late October, decided to adopt the same memorandum as did by three state-owned banking corporations-Sonali, Janata and Agrani.
A source at the World Bank said his agency was opposed to the idea of unilateral recruitment of the CEO by the government, given the fact it would undermine the basic objective of corporatisation and allow the finance ministry to interfere in the bank's day-to-day affairs.
"In case of corporatisation, the bank's board should enjoy greater freedom and operational autonomy. Otherwise, the main objective of turning the bank into a corporation will be derailed," the source added.
After concluding a week-long mission, the WB team led by Kiatchai Sophastienphong also appeared satisfied with the post-corporatisation condition of state-owned Sonali and Janata.
But a source in the mission said the bank's team was dissatisfied with the performance at Agrani Bank.
The "bitter relations" between chairman and chief executive officer of Agrani have stood in the way of turning round the bank, the source said, thus keeping the third largest state-owned lender from harnessing the full benefits of corporatisation.
The largely state-owned Rupali was put on sale under the WB funded enterprise Growth and Bank Modernisation (EGBM) project almost four years ago.
But the government, at 96 per cent stake, had to suspend the bank divestment process early this year as the Saudi Prince, the potential buyer, backed off the deal, reneging on his promises to conclude the buyout process.
Since then the Rupali issue has become a major cause of concern for the finance ministry.
The finance ministry officials said they have to scrutinise the technical aspects of the latest WB suggestion before taking the next course of action.
The $250 million worth EGBM project came into effect in July 2004. About 58 per cent fund of the four-year project was still unutilised until 2007-08, forcing the both the sides to extend its duration for two more years.
In July 2007, the caretaker government turned three once-nationalised banks into public companies as part of the broader reform in the country's banking sector public sector.
Under the agreement with the World Bank, Somali Bank Limited, Janata Bank Limited and Agrani Bank Limited are supposed to cut back their huge bad debts piled up over decades by December next in the light of given targets.
The WB also asked the banks' boards to accelerate the process of voluntary retirement scheme in the banks in a bid to retrench some 15000 or one-third of their total manpower.