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| Sunday, 25 January 2004 |
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Pramuka to resume operations on July 22 The Pramuka Savings and Development Bank (PSDB) has been granted permission by the Central Bank (CB) to resume business from July 22 this year. The CB considered the proposals of Asia Capital, one of the institutes which responded to the CB press notice to forward expressions of interest to take over the management of the bank to resume operations, and has approved it subject to conditions. The CB ruling is subject to Section 30 (3) of the Monetary Law Act, under which PSDB will have to initially confine its business to recovering its loans and advances and not engage in businesses such as accepting and repaying deposits and disposal of its assets. However, if Asia Capital would not provide any funds for the resumption and continuation of the business, the Monetary Board of the CB will review the matter with a view to suspending the business again and taking action in terms of the Monetary Law Act. The control of the bank will come under a Director of Bank Supervision from the date of resumption until July 22. The Court of Appeal and the Supreme Court came out with the ruling on July 21, 2003, with regard to the decision to liquidate the PSDB. The Central Bank considered further options for resumption of business of PSDB and suspended its business again from July 22, 2003. The CB had discussions with the Management of the PSDB, an organisation called the Pramuka Bank Restructuring Committee composed of some depositors and other stakeholders of the PSDB and the PSDB Employees Union, at which they were informed, inter alia, that they could make proposals for the rehabilitation and resumption of business of PSDB. No bank responded positively for the CB proposal to rehabilitate the PSDB. The Employees Association did not wish to make a proposal. Six interested parties responded to the CB's press notice in August 2003, and the CB received concept papers and proposals from the Management of the PSDB on September 9, 2003 and a revised proposal on December 30, 2003; the Restructuring Committee by letters dated September 17, 2003 and December 4, 2003; and from a consortium of investors led by Asia Capital on December 24, 2003 and revised proposals on January 8 and 15, 2004. The CB had discussions with the parties who furnished proposals or concept papers. Having given due consideration to these concept papers and proposals, the Monetary Board kept Asia Capital's proposal to infuse capital upfront to rehabilitate PSDB. Asia Capital had committed to infuse Rs 500-600 million before taking over the business. Other elements of the proposal are Negotiation with depositors and creditors to obtain their agreement on crucial matters, Transfer of the ownership of shares held by the current shareholders of PSDB and Arrange for the reconstitution of the Board of Directors of PSDB. The Monetary Board took cognizance of the fact that even though as currently estimated, the depositors may finally receive around 60 per cent of the capital on deposits on liquidation, there were other creditors such as those who have invested funds in money market bills of PSDB, who would not have qualified for any repayment as they would not be treated as depositors in a liquidation. |
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