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BB launches spl inspection of troubled Farmers Bank

Central bank recheck move comes after heads roll over FBL crisis

Siddique Islam | December 06, 2017 00:00:00

The central bank has launched a special inspection of the problem-ridden Farmers Bank Limited (FBL) to assess its real financial health, after heads rolled over a crisis of the trouble-hit fourth-generation private commercial bank.

"We're investigating different branches to know actual financial position of the bank," a senior official of the Bangladesh Bank (BB) told the FE Tuesday, without elaborating.

Sources, however, said two of the branches -- Gulshan and Motijheel -- along with the bank's headquarters, have already been investigated by the BB inspectors.

They also said the central bank will take next course of action after receiving the inspection report.

Meanwhile, the FBL management has appealed to the BB for giving no- objection certificate (NOC) to issue its subordinate bond worth Tk 5.0 billion.

Earlier on 27 November last, the board of directors of the FBL was reconstituted with the election of a new chairman and a vice-chairman of the bank.

Mohammad Masud and Maruf Alam have been elected chairman and vice-chairman respectively of the PCB.

The same day, ruling Bangladesh Awami League MP Dr. Muhiuddin Khan Alamgir, also a former minister, resigned as the FBL chairman. The bank's audit-committee chairman and director, Mahabubul Haque Chisty (Babul Chisty), also relinquished his position.

Meanwhile, the central bank has given the reconstituted board three months to improve the overall financial status of the private bank.

The board has also been advised that it should gear up the bank's loan- recovery drives and take austerity measures to minimize its expenditures.

Managing Director and Chief Executive Officer (CEO) of the FBL AKM Shameem has already submitted his reply to a show-cause notice issued by the BB on November 26.

The central bank had issued the notice against the MD and CEO of the FBL asking him to explain why he should not be removed.

In the notice, the MD had been instructed to explain two issues: the ongoing liquidity problem of the bank and the fresh loan disbursement despite imposition of an embargo by the central bank.

The timeline for explanation was seven working days.

Contacted, a BB senior official said: "Yes, we have received the reply from the MD and CEO of the FBL."

He also said the central bank is now working on the issue in line with the existing Banking Companies Act.

The latest BB move came against the backdrop of higher credit growth than deposit that threw the new bank into liquidity crunch.

The bank's advances-deposit ratio -- generally known as ADR -- has crossed 85 per cent for several months, which contravenes central bank's rules, according to the BB officials.

The central bank of Bangladesh had earlier set the safe limit of ADR at 85 per cent for conventional banks and at 90 per cent for sharia-based Islamic banks.

Earlier on January 13 last calendar year, the central bank appointed an observer to the FBL for improving its financial health through strengthening monitoring and supervision of the bank's operations.

The BB observer appointment came after the detection of irregularities in sanctioning and disbursing loans and information holdback on non-performing loans amounting to around Tk 4.0 billion in the FBL.

Three central bank investigation teams found the irregularities in inspections of the bank's Gulshan, Motijheel and Shyampur branches in the capital, Dhaka, between September and November 2015.

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