Dissolve BASIC Bank board: BB

The central bank has recommended the government to take action against the board of directors of BASIC Bank Limited in line with the existing Banking Companies Act.

"We've recommended the government for taking action against the board of directors of state-owned specialised bank under clauses 46 and 47 of the Banking Companies Act, 1991," a senior official of the Bangladesh Bank (BB) told the FE Thursday.

Under the two clauses of the  existing banking companies act, the government may reconstitute or dissolve the board of directors of any state-owned bank.

The central bank sent a letter to the secretary of Bank and Financial Institutions Division of the Finance Ministry on the day in this connection.

 "We've also sent a copy of the letter to the finance minister for taking necessary actions in this regard," the BB official noted.

 "The government should take effective steps against the board of directors of the BASIC Bank immediately for improving financial health of the bank," former governor of the BB Salehuddin Ahmed told the FE.

He also suggested that the government should dissolved the board immediately.

The former governor also said the central bank should conduct inspections in other branches of the BASIC Bank to know about the overall situation of the state-owned bank.

 "The authorities concerned will have to take measures to recover the depositors' money and take legal action against those involved in the irregularities under the existing rules and regulations," Mr. Ahmed noted.

Talking to the FE, former deputy governor of the BB Khandker Ibrahim Khaled said the government should reconstitute the board of directors with changing the chairman of the BASIC Bank immediately to protect the depositors' interest.

The BB's latest move came against the backdrop of deteriorating financial heath of the state-owned bank due to mismanagement and irregularities in the recent years.

 "Actually, the financial health of the state-owned bank showed a declining trend by the end of 2011. But such trend turned into a vulnerable situation in the first quarter of the current calendar year," the central banker noted.

The overall default loan of the BASIC Bank rose to Tk 25.57 billion as of March 31 last from Tk 12.82 billion three months back, the BB data showed.

Deposit growth of the Bank dropped to 28.29 per cent as on April 3 last from 58.21 per cent on January 30 last year while the credit growth came down to 17.80 per cent from 36.79 per cent.

Besides, the central bank had earlier found different types of irregularities by the BASIC Bank in giving loans, which include non-verification of customer's creditworthiness, absence of 'know your customer (KYC)' procedures, and extending loans to defaulters.

The central bank investigations detected financial irregularities involving around Tk 45 billion of loans in the three branches located at Gulshan, Dilkusha and Shantinagar in the capital between 2009 and 2013.

The amount of classified loan with those three branches accounts for 80 per cent of the bank's total non-performing loan, according to the BB officials.

The central bank informed the government that the board of directors of the BASIC Bank cannot deny such irregularities and deteriorating financial position of the state-owned bank, another BB official said quoting the letter.

Meanwhile, the central bank has taken different measures including removal of the BASIC Bank Managing Director Kazi Faqurul Islam, appointed an observer and imposed restrictions on both sanction and disbursement of fresh loan from three branches of the bank to protect depositors' interest.

Besides, the central bank earlier sent a file relating to loan irregularities at Gulshan Branch in Dhaka to the Anti Corruption Commission (ACC) for taking legal actions against the involved parties.

"We are yet to get any response about the file from the ACC," the BB official said while replying to a query on the matter.

He also said the central bank is not thinking about sending more files in this connection to the ACC right now.

Currently, the BASIC Bank is running businesses across the country through 68 branches. The state-owned bank started its operations from January 21, 1989.  

Finance Minister AMA Muhith said Thursday the government will not dissolve the board of directors of the BASIC Bank Limited, rather reconstitute it soon.

"We will reconstitute the board of directors of the BASIC Bank. We will not dissolve the board," he told the media when his attention was drawn to the government's steps against the state-owned specialised bank.