Federal Parliamentary Secretary on Finance, Economic Affairs, Revenues and Privatization Rana Muhammad Afzal Khan presented these bills in the National Assembly and the House passed these by a majority without any amendment. The Banks (Nationalization) (Amendment) Bill, 2016 would also facilitate the private shareholders to elect their representatives on the Board of Directors of such banks having private as well as public sector shareholding. According to the Bill, "not less than five and not more than seven other members including one or more directors whose election by the private shareholders, removal and other matters shall be governed by the Companies Ordinance, 1984 (XLVII of 1984)."
According to "The Deposit Protection Corporation Bill, 2016," the deposit insurance is considered an integral safety-net tool to ensure the soundness of the banking system and protect small depositors of a bank in case of its failure. The objective of the Bill is to reduce the moral hazard implicit in the present system and to protect small depositors; it will introduce an explicit depositor insurance scheme through DPC which will compensate depositors up to a prescribed limited amount in case of a bank's failure. The DPC will be a fully owned subsidiary of the State Bank which has the statutory responsibility to ensure the soundness of the banking system. This arrangement will yield maximum synergy and cost-saving due to close co-ordination of the DPC with the State Bank's supervisory functions and resources. The Bill says, "the head office of the Corporation (DPC) would be situated in Karachi: it may shift the head office and establish offices in Pakistan with the prior approval, in writing, of the State Bank."
The Bill further says, "The objective of the Corporation is to compensate the depositors for losses incurred by them to the extent of protected deposits in the event of failure of a member institution as notified by the State Bank.
All banks scheduled under sub-section (2) of section 37 of the State Bank of Pakistan Act, 1956 (XXXIII of 1956), unless exempted or excluded by the Board, shall compulsorily be member institutions of the Corporation and liable to pay the prescribed premium. The Corporation, under the overall supervision and control of the Board, may transact and carry on all or any of the following functions, namely: -
(a) collect premiums and contributions from member institutions and others; (b) acquire, hold, manage, and invest resources of the Corporation; (c) receive grants and borrow money; (d) assess and verify claims of the depositors made against the failed institution; (e) make or cause to be made payments to the depositors to the extent of protected deposits: (f) recover payments made on account of protected deposits from the assets of failed institutions; (g) incur any expenses concerning its functions; (h) enter into any contracts or other arrangements or any financial or other transactions; (i) issue guarantees and indemnities; (j) purchase, hold, manage, lease, encumber, transfer, and dispose of any property and assets; (k) hire, employ, or retain any person(s) as an employee, agent, or consultant on full time, temporary or on deputation basis and make necessary regulations for the terms and conditions of their service; (l) create awareness among general public and depositors about the deposit protection scheme as contained in this Act; and (m) carry on any business, discharge any functions and exercise powers as are necessary for, incidental to, or in connection with; the affairs of the Corporation, or any other act or deed deemed by the Board to be in the interest of the Corporation or for the advancement of the purposes of this Act.
The Corporation shall guarantee the full payment of funds held in depositors' accounts with a member institution, regardless of the number and size of the deposits, up to an amount prescribed by the Corporation from time to time. The above amount shall be inclusive of any interest accrued or return due as at the date of the notification of the State Bank.
Shariah-compliant mechanism of deposit protection in respect of Islamic banking institutions shall be provided in the prescribed manner which shall be approved by State Bank's Shariah Board. Within ninety days of its commencement of business, the Corporation shall publish, in at least two daily newspapers having wide circulation, the guarantee amount as provided under sub-section (1) of this section. Any subsequent change in the guarantee amount shall be in same way published in two daily newspapers having wide circulations.
Protected Deposits shall not cover the deposits of:- (a)persons who have been granted preferential interest or return in deviation from the terms and conditions announced by a Member Institution which the Member Institution is obliged to apply to all its depositors of similar category; (b)members of the Board of Directors and senior management of a member institution including chief executive officer and key executives; (c) partners of auditing firms responsible to certify the Member institutions financial statements: (d)persons having acquired rights to a deposit after the issuance of State Bank's notification under sub-section (1) of section 21; (e)spouse, dependent lineal ascendants and descendants and dependent brothers and sisters of the persons specified in clauses (b), (c) and (d); (f) any Member Institution whose deposits are in its name and on its account; (g)government or government institutions: (h)any company as defined under the Companies Ordinance, 1984 (XLVII of 19 or; (i) any other class of persons or institutions as specified by the Board from time to time:
Provided that where the Board specifically excludes any class of persons or institutions, such decision shall be published by the Corporation in two daily newspapers having wide circulations. Protected deposits shall not cover deposits arising out of or related to transactions or actions constituting 'money laundering~ within the meaning of the Anti-Money Laundering Act, 2010 (VII of 2010), if the offender has been convicted of such offence."
About the share capital and limited liability, the Bill described as " (1)The authorised share capital of the Corporation shall be one billion rupees or such other amount as the State Bank may, from time to time, determine by order in writing and shall be divided into shares of one million rupees each. (2)The paid-up capital of the Corporation shall be such amount as may, from time to time, by order in writing determined by the State Bank and contributed by the shareholders. (3)The share capital may be divided into different kinds and classes as may be prescribed. (4)The liability of shareholders of' the Corporation shall be limited to the amount, if any, not fully paid-up on the shares held by them in the corporation. (5) No divided shall be payable to the shareholders of the Corporation." The Bill further says, " the Board shall consist of the following seven directors, namely:-
(a) a Deputy Governor of the State Bank as nominated by the State Bank; (b) four Directors to be appointed on the nomination by Federal Government in consultation with the State Bank. The directors so appointed shall have knowledge of banking, commerce, industry, economics, finance or law and neither of these directors shall be an officer of the Federal or a Provincial Government or of the State Bank or an employee or director or shareholder of the Member Institution: (c) one Director, an official of the Ministry of Finance, to be appointed on the recommendation of the Federal Government: and (d) the Managing Director."