State Bank of Pakistan

Such circulars have been issued under the authority and same must be treated as having the force of law.

State Bank of Pakistan in its capacity as the premier regulatory authority of the Government of Pakistan in the financial sector acted as a watchdog over the Government in order to secure monetary stability and soundness of the financial system

Main function of State Bank of Pakistan was to ensure and secure stability of the financial system in the country and for such purpose it issued guidelines and advices from time to time in the shape of Banking Control Department (BCD) Circulars.

State Bank of Pakistan in its capacity as the premier regulatory authority of the Government of Pakistan in the financial sector acted as a watchdog over the Government in order to secure monetary stability and soundness of the financial system

Main function of State Bank of Pakistan was to ensure and secure stability of the financial system in the country and for such purpose it issued guidelines and advices from time to time in the shape of Banking Control Department (BCD) Circulars.

Legal effect of circular guidelines by the State Bank of Pakistan.

Whether an unperformed re-schedulement can oust a defaulting customer from qualifying for relief under Circular No.29 is a question which, if raised., would also require consideration.

BPD Circular No. 29 has substantive content and effect.

Petitioner/ investor, in the year 2000 made investment of Rs.2.00 million with the Bank in its monthly income scheme under "Profit/Loss Sharing System"

At time of making investment, petitioner earned a rate of profit of 9.0% on the Scheme earning Rs.16, 000 per month income without deduction of Zakat; thereafter from time to time Bank reduced profit rate, resulting in the year 2004 profit payment was diminished to Rs.4,463 per month

Plea of Bank was that it had informed the petitioner that `Profit/Loss Sharing System' under which petitioner had made investment, did not contain any contractual commitment for a fixed or other rate of profit to be paid by the Bank on its monthly income Scheme and that profit rate on Profit/Loss Scheme' deposit accounts were declared by the Bank with the prior approval of State Bank of Pakistan in terms of its BCD Circular 34 date 26-11-1984

Petitioner had reiterated his basic point that it was contrary to reason that rising profits of the Bank should be reflected in declining profits rates on its Profit/Loss Scheme Accounts'

Petitioner had sought careful scrutiny of the record submitted, but had not raised any specific objection to the Bank's financial statements and P.L.C. profit rate calculated under BCD Circular No.34

Financial statement of Bank had shown that its profit after tax had risen considerably in the year 2004 and net mark up/interest income of Bank had also increased during the same period

Financial statements of the Bank did not provide specific and relevant information for the purpose of BCD Circular No.34 criteria and calculation

State Bank of Pakistan being author of BCD Circular No. 34 and its governing statutory authority, same played a regulatory role to ensure compliance of

Nature.

Forced Sale Value (FSV) of borrowers' assets over which. The Bank had a charge and manner in which the same was to be decided by the Committee

Guidelines as per State Bank of Pakistan BPD Circular No.29 of 2002 detailed.

Defendant had not paid 10% of the amount, as required under B.P.D. Circular No.29, had not accepted the forced sale value determined by the valuer and no agreement in terms of Cl. 12 of B.P.D. Circular No.29 was entered into between the parties

Bank had rightly refused to accept the request made by the defendant for settlement of claim under the incentive scheme.

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Schedule Banks are monitored and controlled by State Bank of Pakistan, thus, they are bound to show respect to such policies.