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BASIC Bank in deeper trouble

Management seeks govt support to boost image, deposits

REZAUL KARIM | November 27, 2019 00:00:00

The scam-hit state-run BASIC Bank is finding it hard to procure funds from depositors, officials have said.

Its battered image is thought to be the number one problem.

BASIC Bank managing director Md Rafiqul Alam wrote to finance ministry last Wednesday seeking funds as well as support to boost bank's public image.

He has sought government intervention to help remove roadblocks to the bank making a comeback.

According to the officials, the bank does desperately need to find ways to improve its deposit base as it has long been facing problem in this connection.

The bank has sought permission to collect tax and VAT at source and excise duty, and deposits from various state entities.

It has also suggested various government agencies open accounts and deposit their project funds.

"The government's cooperation in overcoming the bank's problems has been sought as it needs an urgent injection of funds," a BASIC Bank source told the FE on Tuesday.

"We've received some proposals sent by the specialised bank, seeking help to reach its target, address existing problems and meet capital shortfall," a high banking division official said.

Data available until November 15 shows that BASIC Bank suffered capital shortfall and provisioning deficit worth Tk 35.83 billion and Tk 30.73 billion respectively.

As of November 15 this year, the number of the bank's loss-making branches has stood at 30. It was 18 until December 2018.

Even the bank's finance for foreign trade has dropped drastically to Tk 28.24 billion (import finance) and Tk 18.87 billion (export finance) until November 15.

It was more than Tk 41 billion (import) and more than Tk 23 billion (export) until December 31, 2018.

When asked, Mr Alam said, "We're going slow on investment and advances. We're currently going for a small-scale investment…"

He recognised the need for collecting deposits as it is the lifeblood of any bank.

The volume of deposits reached Tk 132.54 billion on November 15, 2019. It was Tk 131.82 billion at the end of December 2018.

The amount of classified loans was Tk 85.20 billion as on November 15, 2019. It was Tk 86.40 billion on December 31, 2018, according to the bank.

Officials said BASIC Bank needs deposits to fortify its capital base in order to comply with the current Basel guideline and improve other major indices.

The bank has granted loans bypassing rules in recent years, increasing the volume of classified loans and eroding the value of collateral, according to a senior bank official.

Therefore, he said, provisioning requirements have increased against classified loans.

The government had appointed Sheikh Abdul Hye Bachchu chairman of BASIC Bank in September 2009 on a contractual basis for three years.

Later, his tenure was extended for two more years in September 2012.

Sources said BASIC's performance started deteriorating as Mr Bachchu and other directors allegedly indulged in "gross irregularities in sanctioning loans in violation of relevant rules and regulations".

The bank's board of directors was dissolved in 2014.

Bangladesh Bank's findings showed a staggering Tk 35 billion in loans had allegedly been disbursed irregularly from Gulshan, Dilkusha and Shantinagar branches of the bank between 2009 and 2011.

Presently, the problem-ridden bank has taken a three-year plan of action to reduce its staggering default loans to a tolerable level.

The government provided the bank with funds between fiscal years 2013-2014 and 2016-2017 to meet its capital shortage.

It gave Tk 12 billion in 2015 and Tk 10 billion in 2017 for capital replenishment.

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