The Financial Express

Beleaguered BASIC Bank: Finance minister threatens to fold losing branches

State lender's soured loans top Tk 90b

| Updated: August 02, 2019 18:34:22

Finance minister AHM Kamal -- File Photo Finance minister AHM Kamal -- File Photo

Finance minister AHM Kamal on Thursday lashed out at the officials of the BASIC Bank for their failure to improve the financial health of the troubled state lender.

As the scandal-hit bank is struggling to control bad loans, the minister said they have decided to shut down the branches that have incurred losses for three consecutive years, including the current year.

He said the bank has more than doubled its branches over the last 10 years to 72 since 2009. The number of employees (2,101) has also increased manifold during the period.

The government has a total of 14 state-owned enterprises (SoEs), but the salary structure of the state-run bank is the highest, he said, while visiting the troubled bank and engaging in a discussion meet with the employees.

"I don't know what are the tasks of too many employees. It has to be restructured and the branches need to be curtailed," he said.

"My directive is to shut down the branches incurring losses consistently for three years," he said.

As the minister asked the employees to raise hands who agreed with the decision, only a few responded.

"You (employees) have to earn the money for yourself and the institution as a whole. If you think you will escape by keeping mum. No way…I will shutter down those loss-making branches without considering any other factors," he said.

The finance minister also hinted at launching special audit and inquiry into the officials who approved and disbursed bad loans.

"If anyone is found guilty, he or she will be punished. I will not show any mercy towards them. When a situation is tough, tough decision needs to be made," he said.

Talking about a Bangladesh Bank circular allowing the loan defaulters to reschedule classified loans with 2.0 per cent down payment, Mr Kamal said the defaulters will not be charged interest rate over 9.0 per cent and given a timeframe of 11 years to repay.

He suggested the BASIC Bank officials get back the bank's best old clients instead of looking for new clients and improve the efficiency of management.

"Tell them (the defaulters) that the bank will again finance once the dues are paid," he said, adding that he will assign security agencies against the wilful defaulters to trace them out.

About the support of the finance ministry to arrange fund for the bank, he said he will try to arrange some funds for the bank on a temporary basis and observe the management as to how they manage it.

Chairman of National Board of Revenue (NBR) Mosharraf Hossain Bhuiyan suggested being harsh against the defaulters who did not show any interest in repaying the loans.

Established in 1989, the state-run commercial bank had been one of the good performing banks in the country until 2009 but things started deteriorating afterwards when a string of loan scandals were exposed.

The volume of non-performing loan was only 4.8 per cent in 2009, which jumped to 67 per cent in 2014. Then it went down to 54 per cent, but it again climbed to 59 per cent, officials said.

Presenting the bank's performance over the years, its managing director Md. Rafiqul Alam said irregularities, abnormal growth in loans and advances, manpower and branches have led to the capital shortfall through increasing the number of losing branches.

The volume of classified loans was Tk 81.08 billion in 2014 and it increased to Tk 91.13 billion as of now. There was no liquidity shortfall in 2009 but that is now estimated at Tk 36.73 billion, he said.

He said a total of 172 defaulters involving Tk 5.67 billion have so far applied for rescheduling with a 2.0 per cent down payment of the loan while 41 others having cumulative loans amounting Tk 3.24 billion partially made down payment.



Share if you like