Banking Sector Restructuring and Privatization Project

closed

Closed

The objective of the Banking Sector Restructuring and Privatization Project is to help Pakistan continue implementation of its banking reform program, in an aim to achieve a competitive private banking system, strong regulatory framework, and an effective banking court system. The project components include: 1) the Nationalized Commercial Bank (NCB) staff rationalization, to be accomplished through a voluntary separation scheme, whereby a severance package (consisting of cash compensation calculated on the basis of one month pay per year of service, plus commutation of all annual leave, pensions, and medical benefits) will be provided. The voluntary scheme will be complemented by the out-sourcing of non-core staff, and leave without pay, but without benefits for those in executive levels; 2) a proportional reduction of bank branches, will accompany staff rationalization to assure a structural, and virtually irreversible reform, namely in the Habib Bank Limited (HBL), United Bank Limited (UBL), and National Bank of Pakistan (NBP). The cost of this component would come mainly from the settlement of long-term leases on rented space, and, NCB funds will finance this cost as part of counterpart funding; 3) the amalgamation of the National Development Finance Corporation (NDFC) into a National Bank will entail severance payment costs, and the costs emanating from recognition of quasi fiscal costs, embedded in NDFC's balance sheet; 4) completion of the Muslim Commercial Bank, and Allied Banking Limited privatizations, through government divestments for the first, and, taking into account the level of insolvency of the second, these costs will be financed by the Government, implied in the price of remaining shareholding; and, 5) other policy measures, such as liberalization of bank branching policy; revision of tax policy and administration; amendment of the Loan Recovery Act (1997); reform of the National Savings Scheme; and discontinuance of the new Foreign Currency Deposit scheme.

FY17 - Financial Sector

World Bank Group

Project

Hospital, Commercial, Government