Govt injects Tk 15b into Sonali, BASIC

The government has injected Tk 15 billion into two state-owned banks --Sonali and BASIC -- which were sucked almost dry of capital through alleged lending forgeries.     

Officials said Wednesday that kiss of life was given to the two struggling banks early this week to revamp their financial health and continue operations smoothly.
They said the ministry of finance (MoF) had already provided Tk 7.10 billion for the Sonali Bank Limited and Tk 7.90 billion for the BASIC Bank Ltd to make up for their capital shortfalls.
"The ministry has recapitalised both the banks by injecting Tk 15 billion Monday. Hope the funds will revamp the operations of the struggling BASIC and Sonali banks," Dr M Aslam Alam, secretary of the Bank and Financial Institutions Division (BFID) under the MoF, told the FE.
Former central bank governor Dr Salehuddin Ahmed criticised the bailout steps, saying that it was unfair to recapitalise the inefficient banks with public funds.
"The government should not inject money for meeting the capital shortfall of the banks that have huge non-performing loans (NPL). This is a kind of incentives for the inefficient state-owned banks which deserve punishment for their financial scams, huge NPL and poor services and operations," he said while talking to the FE.
The BFID secretary, Dr Alam, said injection of Tk 15 billion is the first instalment of the Tk50 billion allocated in the current national budget for recapitalising the struggling state-owned banks.
"Since the capital base of the BASIC Bank is very poor at this moment, we have given them Tk 7.90 billion. By June this year we may consider more fund for its recapitalisation on review of its balance sheet," he added.
Meanwhile, the BFID is considering a three-year plan for state-owned banks, especially the scam-hit BASIC Bank, as the government decides to disburse Tk 50 billion to meet their capital shortfalls during the current fiscal year (2014-15).
In line with the International Monetary Fund's conditions tagged with loans under the Extended Credit Facility, the government has decided to replenish the shortfalls in two phases.
As the banks are facing huge capital shortfalls due to various scams last year, the IMF set a condition that public money could be injected into the banks only if they go through drastic reforms.
Financial scams like big loan forgeries by Hall-Mark and Bismillah Group and swelling NPLs of the country's largest bank, Sonali, and the BASIC Bank have hit hard their banking operations.
As of June 30 this calendar year, the capital shortfall of the BASIC Bank had stood at Tk 16.75 billion and of the Sonali Bank at Tk 15.11 billion.
Meanwhile, the central bank officials have said the SoCBs' capital crunch may worsen further in the last half of the current calendar year (2014) following an upturn in their classified loans.
"The capital shortfalls of Sonali Bank and BASIC Bank will go up in the third quarter of the current calendar year due to the higher volumes of non-performing loans (NPLs)," a senior official of Bangladesh Bank (BB) said.
In the July-September period this year, the classified loans of the BASIC Bank stood the highest at Tk 15.58 billion. More than half (54 per cent) of the total Tk 61.48 billion loans from BASIC has turned classified, banking sources said.
Sonali Bank's default loan at the end of September had piled up to Tk 109.49 billion from Tk 105.49 billion as of end of June.
Dr Salehuddin Ahmed said the government should give a deadline to the state-owned banks for recovering their dud money and bring them on track.  "If the banks failed, the bankers and persons responsible for this should be punished," he added.
The former governor suggests merger of the struggling SoCBs if the preliminary steps failed, rather than injecting funds from the taxpayers' money.
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