Despite the fact the central bank, the State Bank of Pakistan (SBP), has clarified its position and denied shifting of its five departments from its Karachi head office to Lahore, the trading community and political leaders are still "unsatisfied" as they fear the move would further increase polarisation among the provinces and create "heart-burn" in Sindh.

The business community, led by Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has reacted sharply to the SBP’s move as its Standing Committee on Banking, Credit & Finance Chairman Dr Mirza Ikhtiar Baig, in a statement, has termed the move "unjustified".

Similarly, on political front, the Sindh government has also opposed such a move by the SBP. Provincial Minister for Industries and Commerce Manzoor Wassan said the Sindh government was not in favour of the transfer of the SBP departments to Lahore from Karachi as, according to him, the federal government was conspiring to keep Sindh on the backseat.

Chairman of Senate Standing Committee on Finance and Revenue, Senator Saleem Mandviwalla, has also expressed concerns over the decision. "We will not let this happen," he said.

A spokesman for the SBP on October 14, however, vehemently denied that any of its department is being shifted to Lahore and termed it "a measure to meet the oversight and logistic requirements for operational efficiency." A statement by the SBP said that a part of few functional departments of SBP’s subsidiary, Banking Services Corporation (BSC), responsible to undertake operational work is being relocated to Lahore. The SBP has total two fully-owned subsidiaries i.e. SBP and National Institute of Banking & Finance (NIBAF).

Five out of 11 departments of the subsidiary BSC, having oversight on functions relating to currency management, bankers to governments, internal audit, foreign exchange operations and implementation of Development Finance Group (DFG) related policies, performed at office level on transactional and day-to-day basis, are being partially relocated closer to Central and Northern regions to ensure greater operational efficiency and logistic ease according to workload of these activities.

The central bank has also clarified the concern about transfer of its staff from Karachi to Lahore. The statement said this relocation exercise is being managed purely on optional basis. So far, employees have overwhelmingly responded to the decision of the management and options from good number of employees have been received for relocation to Lahore. The last date for submission of options was October 14, 2016.

Moreover, the SBP spokesman said the Head Office of BSC and its six departments, including the Strategic and Corporate Affairs Department, will continue to be based in Karachi. The MD office will also continue to be housed at Karachi.

Interestingly, the business community and senior bankers in Karachi consider it a political move by the "Punjab-centric" federal government. "The State Bank’s move has sent a negative message at a time when there are many differences among the provinces including the longstanding dispute on National Finance Commission (NFC) Award," said a senior banker, Dr. Shahid Hasan Siddiqui, who heads Research Institute of Islamic Banking and Finance at Karachi.

He pointed out that the banking sector, in the past, has witnessed shifting of head offices of two major banks from Karachi to Lahore because their new owners belonged to the Punjab province. After privatisation of Muslim Commercial Bank (MCB) and Allied Bank of Pakistan (ABL), their head offices were moved from Karachi to Lahore.

"Our country is already facing problems of provincialism and such attempts would fan such sentiments," Dr. Siddiqui said, adding that the present SBP Governor does not have vast experience as he has never headed any commercial bank during his entire career. "So, the federal government is easily influencing his decisions."

Karachi Chamber of Commerce and Industry (KCCI) President Shamim Firpo also reacted sharply to the news about shifting of some SBP offices, saying "this is unfair and unacceptable for the business and industrial community."

According to Firpo, the business and industrial community of Karachi has been facing immense difficulties because of the federal government’s sheer negligence towards the issues of Karachi. Businessmen fear after the relocation of some departments, the entire central bank would be shifted to Lahore in near future.

But some independent bankers believe that for administrative purposes, if some offices are shifted to any other place in the country, it should not be seen as a conspiracy or a provincial issue. For example, a banker pointed out that the SBP had shifted its staff training institute near Sindh Secretariat Karachi to Islamabad a few years back and there was no objection from any part.

But Karachi’s businessmen have valid reasons to raise their eye-brows. "Even if it was very necessary to move some operations from the Karachi head office to some other cities, then why Islamabad was not selected," asked Majyd Aziz, a former President of Karachi Chamber of Commerce and Industry. According to him Islamabad would be suitable as every other day the SBP Governor and Deputy Governors and other high officials visit Islamabad for their meetings in Finance Ministry.

According to him the timing for such a decision was not suitable as the federal government is already facing many political pressures and challenges and by making this decision it has caused "heart-burns" in Sindh. "This decision is against provincial harmony and will also fuel more conspiracy theories."

Objecting to the shifting of two major departments like international audit and foreign exchange operations from Karachi to Lahore, Majyd Aziz said the argument given by the SBP is unacceptable. The internal audit department should remain in the head office as all reports and concerned documents from the branches located all over the country are sent there and all major decisions regarding internal audit are made in the head office. "It will dilute the importance of the head office," he added.

If the SBP wants devolution of its functions, then some departments may have been shifted to the Peshawar branch as well which is quite important one but it was not done. According to Majyd Aziz, this decision will not make any difference on the financial front.