Government in search of Tk 200b to fund bank-resolution recipe

With no budgetary allocations in state coffers for funding bank-resolution recipe, the interim government now looks to secure money required for floating a state-owned shariah bank amalgamating five ailing private banks, officials say.

To keep afloat the banks -- hollowed largely by forged lending in the past -- the government at a meeting Sunday decided to sanction some Tk 200 billion without ascertaining wherefrom the money will come.

Finance Division officials say there is no budgetary allocation that can be used as capital of the planned five-in-one new bank.

Talking to The Financial Express, a senior finance official said some Tk 352 billion would be needed for the new bank to be born. Of the total sum, some Tk 150 billion will be collected from institutions and conversion of institutional deposits.

The government agreed to provide Tk 200 billion for the new bank in the making.

"There are two options for the government through which money can be mobilised for this venture. One is -- the money can be collected from the revised budget if some ministries surrender some portions of the funds allocated in favour of them.

"The other one is to collect funds through issuance of treasury bills and bonds."

Another senior Finance Division official says they are yet to receive any directive from the top bosses of the ministry from where the fund has to be collected.

Sources said central bank officials at Sunday's meeting had proposed to provide required funds for bank resolution from its own profits unless the government can manage the money.

However, the finance officials at the meeting ruled out the option, since the central bank's profit is considered government's non-tax revenue and has to be deposited immediately with the exchequer.

The government will then decide where to spend the fund.

The five banks up for mergers are First Security Islami Bank, Union Bank, Global Islami Bank, Social Islami Bank and Exim Bank.

Sources say these banks have been beggared of most of their capital following "wanton looting" during the past regime.

Forensic audits conducted by the globally acclaimed audit funds found 96.37 per cent of total loans at the First Security Islami Bank defaulted, while in case of Union Bank the ratio is 97.8 per cent, at the Global Islami Bank 95 per cent, at Social Islami Bank 62.3 per cent and at Exim Bank it is 48.2 per cent.

The banks are failing to pay money back to the depositors-even some paying salary to employees by taking loans from the central bank, officials say.

"There is no other option for the banks but to merge for survival," opines one official.

syful-islam@outlook.com