Advocating a privatisation model of Pakistan, the British consultant, GBRW, has recommended four different processes to sell this nationalised commercial bank (NCB) to private hands.

The Rupali Bank that has a default loan of around Tk 2,000 crore will be the first NCB to be privatised since early 1980s when Uttara Bank and Pubali Bank were sold to the private owners.

In January, the government is expected to formally seek private buyers for Rupali Bank, one of the four NCBs now undergoing a series of reforms, by releasing an information memorandum on the bank.

The GBRW, after working for the last six months, recently submitted its recommendations to the finance ministry, Rupali Bank sources said.

On the concept of the assets management company (AMC) that could deal with Rupali Bank's non-performing loans, the consultant said the AMCs are often state-owned but they can also involve private sector capital.

An AMC may deploy private sector experts as external consultants to train local staff of the bank for collection and to create momentum for recoveries. Deployment of private experts also eliminates corruption.

China, Thailand, Korea, Indonesia and many countries in the central and Eastern Europe, Latin America, and Africa have AMCs.

The creation of an AMC for Rupali Bank can also be used as a technique to attract new investors to the bank, sources said.

Transfer of loans to an AMC will leave a hole in the balance sheet of the bank. This hole is normally filled by the issuance of government bonds in consideration for the acquisition of the loans transferred.

In line with the consultant's suggestion, the government may consider one of the four processes to privatise Rupali Bank. The first one is retaining Rupali's current structure as an integrated body along with its loan portfolio.

The second process is retaining the bank's structure but restructuring the loan portfolio into those loans, which are regarded as either current and which are being highly unlikely to be recovered. In this process, the recoverable loans will stay with the bank and the bad loans will go to the AMC.

Besides, the government may consider splitting the bank's branch network by location, type of business or geography. The branches of urban locations may be separated from those in the rural areas. The separation could also be made considering the types of loans and deposits of the branches.

The last approach is a combination of the three processes.

The Pakistani model of privatisation outlines the sale of an institution to a strategic investor with management and majority ownership, sale to a strategic investor with management and minority ownership, management buy-out and public offer of shares on the stock exchange.

"The government will now scrutinise the consultant's report and take its decision soon," said a finance ministry official.

The World Bank and International Monetary Fund (IMF) have been hammering on privatising the four nationalised commercial banks which are heavily burdened with default loans of around Tk 12,000 crore.