News Column

NAB after ex-NBP bosses in mega banking scam

July 3, 2014

NOKHAIZ SAHI



The National Accountability Bureau (NAB) has initiated investigation against former executives of National Bank of Pakistan (NBP) for purchasing Core Banking Solution(CBS) at exorbitant rates; thus committing an offence cognisable under the NAB ordinance, documents available with The Nation reveal.

Reportedly, the CBS system was purchased for $71 million while its market price was just $17.5 million. According to NAB’s letter, the Financial Crimes Investigation Wing of NAB Sindh has sought all relevant record since 2003 from NBP’s legal head.

CBS is a banking service provided by a group of networked branches where customers may access their accounts and perform basic transactions from any of the member branch offices. CBS, comprising specially designed software and hardware, are new jargon frequently used in banking circles.

The advancement in technology, especially Internet and information technology has led to new ways of doing business in banking. These technologies have cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as core banking solutions.

The NAB letter says that as the inquiry has revealed and evidence come out that offence regarding purchasing Core banking application at higher rates by NBP has been committed, therefore the competent authority directs “concerned officer to appear before Muhammad Nasir Shahzad Asst Director/IO at FCI Wing NAB (Sindh)”.

A petition was also filed in the Supreme Court in 2011 regarding CBS in which SBP’s observations were also made the base by which the bank management had confessed that the CBS was implemented in only one branch instead of 250 as promised. The petition had revealed that in the year 2002, the bank planned to acquire a “Core Banking Application” at total estimated cost of $17.5m-$2.5m for software and $15m for associated hardware. Under Section 33-B of NAB Ordinance 1999, all purchases of Rs50 million or above were required to be reported to NAB for obtaining mandatory clearance. Furthermore, a certificate was also required that all procurements procedure was followed.

The petition quoted SBP’s inspection report, dated 31-12-2010, which states that SBP team observed various irregularities in procurement/implementation of CBS. It was observed that at the time of initiation of project, neither the bank conducted any exercise on Business Process Reengineering nor was any selection criterion defined for the system in violation of BSD Circular No. 8 of 2005. Resultantly, after considerable lapse of time, the bank was considering to amend the existing contract with the vendor to run the core banking system on centralised basis instead of de-centralised mode. So far, the system had been implemented in only one branch, whereas the bank had paid $9.372m to the vendor. It may be mentioned here that the total cost of project (including the hardware) was estimated at $56m. The total payable to the vendor was approximately $18m out of which the bank had paid 90 percent of the licence fees at the outset, while $0.908 million was paid in October 2010 as an ad hoc payment.

As per the initial timelines of the project, 250 branches were to have the system installed by September 2010, which was subsequently amended as 100 branches by July 2011. On the contrary, CBS has been implemented in just one branch of the bank and even UAT (User acceptance testing) of that branch was not completed.”


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Source: Nation (Pakistan)


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