The parliamentary standing committee on finance ministry suggested Sunday that Bangladesh Bank should further investigate irregularities and corruption in two private commercial banks.
The committee also recommended ensuring exemplary punishment for the persons to be found involved in irregularities to restore clients' confidence and rescue the two banks from possible bankruptcy.
It also asked the central bank to submit a detailed probe report to the committee within next two months.
Presided over by its chairman Abdur Razzak at Jatiya Sangsad Bhaban, the committee came up with the recommendations at its 21st meeting based on the report submitted by the Bank and Financial Institutions Division of the Finance Ministry on NRB Commercial Bank and Farmers Bank.
Although the committee expressed dissatisfaction over irregularities and corruption, it does not want any public institution dealing with people's money should be closed down. Bangladesh Bank has also agreed with the committee's decision and assured it of stern action against the culprits. The committee suggested reorganising the board of directors and management body, if necessary. The committee said the board cannot abdicate the responsibility for irregularities that took place in these banks.
Besides, the committee warned Islami Bank against their recent aggressive lending after reconstitution of the board and suggested submitting a report on the borrower and which sector the bank is providing loan and what amount.
Committee chairman Abdur Razzak briefed the media after the meeting. He termed the situation of the two commercial banks horrible.
He said although Farmers Bank is a private bank, it's a public institution which deals with public money. They cannot operate like this.
The report said the financial condition of Farmers Bank is deteriorating as it has been operating by taking loans from other banks. The bank is taking deposit at a high interest rate. The situation is so bad that it does not have the capacity to pay liabilities.
According to the report, Farmers Bank has been suffering from liquidity crisis for the past one year which is now acute. The bank has been failing to preserve cash reserve requirement (CRR) and statutory liquidity ratio (SLR). As per the latest data, the depositor's money is Tk 51.25 billion while interbank deposit is Tk 5.35 billion, call money loan Tk 1.45 billion and cash reserve in BB Tk 300 million. The amount of direct government securities is Tk 10.09 billion which means the bank does not have the capacity to repay liabilities.
Although the BB has restriction on new loan and increasing loan limit, Farmers Bank very often defy the instructions. The loan and deposit ratio has reached 88.70 in the third month in 2017 due to dissimilarities between loan growth with deposit growth. The amount of classified loan is Tk 3.06 billion which is 6.35 per cent of the total loan disbursed and advance loan. There is no genuine cash flow than loan which indicates that the amount of classified loan will be higher against the quality asset. The net loss of the bank stood at Tk 131.1 million in June, 2017 and 28 out of the total 54 branches are incurring loss.
Abdur Razzak said the committee has set the time for two months to monitor the compliance situation of Farmers Bank with the rules and regulations of BB. NRB Commercial Bank has irregularities in arranging capital to provide loan.
There is internal conflict among the board of directors of NRB Commercial Bank and there is proxy directors. Even they have appointed a GM as a director. Besides, they approved meeting resolution with the signatures of those directors who were not even present in the meeting. Moreover, some people laundered money through the bank to Dubai and again brought that money to Bangladesh as dollars. The BB has asked the authority to remove the chairman, vice-chairman and managing director but they have got a stay order from the Supreme Court.
"We have asked the BB to further investigate these issues and submit the report by December," Mr Razzak said.
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