Basic Bank : The cost of political choice?

Two different vernacular contemporaries in their last Tuesday's issues carried news reports on the state-owned BASIC Bank which has, of late, earned infamy because of large-scale loan irregularities.
The content of one report, headlined, 'BASIC Bank in the red for the first time since its establishment' is very much linked to that of the other report. The second report gave the scoop news that the incumbent chairman of the troubled bank will be removed by the ministry of finance (MoF) when the latter reconstitutes the board of director of the bank concerned.
While revealing the irregularities indulged in the process of sanctioning and disbursement of a large volume of loans and appointment of bank officials, the central bank and others have pointed their accusing finger at the board of directors of the BASIC Bank.
Since the central bank does not have the legal power to dissolve the boards of the state-owned banks unlike the private ones, it has recently sent a set of recommendations to the relevant division of the MoF to do the needful in the case of BASIC Bank.
The BASIC Bank has been an exception among the state-owned ones since its birth on August 02, 1988. Its coming into being also was not like most other banks. It started as a joint venture bank in the private sector to offer funds to the small-scale industries. The now defunct BCC Foundation and the government of Bangladesh had 70 per cent and 30 per cent stakes respectively in the bank. But with the liquidation of the Bank of Credit and Commerce International (BCCI), the BCC Foundation became non-functional and the government had to acquire all its stakes, making the bank fully state-owned. Yet the bank continued to operate like a private bank with its sole owner refraining from meddling into its management affairs.
Such non-interference paid off dividends. The bank turned out to be one of a few the well-managed and profitable state-owned entities. Its operation was unlike the other state-owned banks which saw the decline of their dominance because of the entry of a large number of aggressive and relatively efficient private sector counterparts.
But the decline of the flagship bank started when it got a new board under a new political government in 2009.  
According to a newspaper report, the BASIC Bank earned a net profit of about Tk. 650 million in 2009 when the new board, headed by a chairman appointed under political consideration, took over.  In 2013, the bank for the first time suffered a loss of over Tk. 530 million. But an audit report, which has been submitted to the government and the Bangladesh Bank after authentication by the BASIC Bank board, has estimated the loss of the bank in 2013 at Tk 2.62 billion.
At the end of 2013, both provision and capital shortfall of the bank ballooned. The bank authorities tried to misguide the central bank by showing the share of the non-performing loans (NPLs) in its total outstanding loans at 11.82 per cent. But the audit report has found the same to be nearly 29 per cent.
The central bank, after investigations during the last three years, detected irregularities involving loans worth about Tk. 45.5 billion. Allegedly, the chairman and some influential quarters have taken funds out of the bank against a number of fake firms. Newspaper reports had cited an instance where a borrower got a large amount of loan just a day after opening an account with a BASIC Bank branch.
When newspapers quoting the central bank investigation reports started publishing stories about the irregularities in the bank, the bank management through advertisements dismissed the allegations and highlighted so-called achievements of the bank under the 'able and dynamic' leadership of its incumbent chairman.  
The advertisements, possibly, convinced the MoF which did not feel it necessary to look into the allegations seriously and take corrective measures. The indifference has taken its toll on the financial health of the bank which was once a role model for other state-owned ones.  
The desire of a political government to get its 'own' men appointed to key positions in important state organizations and missions abroad is nothing unusual. But such a desire can be easily fulfilled under the 'spoils' system' (the practice in which non-elective public offices are filled with supporters of the victorious political party) as is the case with the USA.
Since the practice of appointing people to some key government posts under political consideration has been in vogue in the country since independence, it is hard to ignore such an urge in the political domain. But it is unlikely that the major political parties that occupy power in turn have any dearth of people having necessary competence, honesty and integrity to fill up such key positions. None would mind if such people are given the chance. Unfortunately, the political parties, in most cases, prefer incompetent sycophants who ultimately earn bad name for them. The Sonali Bank proved it to be true. Now it is happening with the BASIC Bank.
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