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SoCBs, ICB yet to take decision on capital injection

Top officials meet at BB on Farmers Bank

FE Report | February 14, 2018 00:00:00

Four state-owned commercial banks (SoCB) and a financial institution are yet to take any final decision on injecting capital into the troubled Farmers Bank Limited (FBL) in a bid to rescue it.

Chairmen and managing directors of the Sonali, Janata, Agrani and Rupali banks and Investment Corporation of Bangladesh (ICB) discussed the issue at a meeting at the central bank in Dhaka on Tuesday, with Bangladesh Bank (BB) Governor Fazle Kabir in the chair.

The injection of nearly Tk 11 billion by the five public lenders into the FBL was discussed at the meeting, but no final decision was taken in this regard, the CEO of a leading stated-owned commercial bank (SoCB) told the FE after the meeting.

When contacted, a senior executive of BB said the meeting discussed different options of injecting fresh capital into FBL.

"We'll inject our fund into the FBL if the government desires so," said Dr Zaid Bakht, Chairman of the Agrani Bank Limited, while replying to a query.

He also said they would examine different aspects of the investment before taking a final decision.

Sources, however, said the fund can be injected using different ways including inter-bank call money or in the form of deposit.

On February 7, Finance Minister AMA Muhith told reporters that a move was taken to save the Farmers Bank and the process is under consideration.

The government can't allow a bank to fail, he said, adding: "Bank failure is a horrible thing for any country."

The government's latest moves came in the wake of a decision taken by the reconstituted board of directors of FBL to raise its capital to nearly Tk 11 billion through offloading shares.

As part of the restructuring plan, nearly Tk 11 billion authorised capital of the FBL will be converted into paid-up capital to run the bank smoothly.

Earlier on January 14, Chowdhury Nafeez Sarafat was elected the new chairman of the FBL, replacing Mohammad Masud.

The troubled bank is now facing liquidity crisis mainly due to high credit growth compared to that of deposit, according to the (BB) officials.

The bank's advance-deposit ratio (ADR) has exceeded 85 per cent in the last several months, which is inconsistent with the central bank's rule, they added.

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

Earlier on 27 November last year, 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 had been elected chairman and vice-chairman respectively.

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

On December 19 last, the central bank removed the Farmers Bank's MD and CEO AKM Shameem on charges of his alleged failure in liquidity management.

The central bank earlier appointed an observer to the FBL for improving its financial health through strengthening monitoring and supervision of the bank's operations.

The BB's observer appointment came after detection of irregularities in sanctioning and disbursing loans and the incidents of hiding information about non-performing loans amounting to around Tk 4.0 billion in the FBL.

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

The FBL started its journey on June 03, 2013, aiming to provide efficient banking services to all levels of customers and contribute to the socio-economic development of the country.

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