Sonali Bank to inject Tk 1.65b as equity into Farmers Bank

FT ONLINE

The state-run Sonali Bank has decided to inject Tk 1.65 billion as equity into scam-hit Farmers Bank Ltd. soon, a senior official said.

The board of directors of the state-run bank at its 577th meeting has given its seal of approval to the investment of the fund, tagging some conditions.

The conditions were set in line with the decision taken earlier by the government to meet liquidity crisis of the privately-owned Farmers Bank, he said.

As per the conditions, the Farmers Bank will have to take required steps as per the company act, including amendment to its Memorandum and Articles of Association.

Besides, the private bank will also have to take initiative to offload its shares in the capital market in the future for the sake of the investor bank.

A share purchase agreement (SPA) was signed between the state-run bank and the privately-owned bank on May 16, according a bank source.

The board of directors of Sonali Bank also nominated its managing director as a director of the private commercial bank.

Contacted, a senior official of the Sonali Bank said, "We have informed the privately-owned commercial bank about the board of director's decisions and requested them to take required steps in this regard."

In the light of the decision taken earlier by the government, Sonali, Janata, Agrani and Rupali banks will provide Tk 1.65 billion as equity each to the Farmers Bank while the Investment Corporation of Bangladesh will inject Tk 550 million into the private commercial bank.

he added, a high official of the central bank said the injected fund would be treated as paid-up capital. The bank's authorised capital is now Tk 15 billion.

On February 07, Finance Minister AMA Muhith told reporters that a move was underway to save the Farmers Bank and the process was under consideration.

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

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

Earlier on November 27 last year, the board of directors of the bank was reconstituted with the election of a new chairman and a vice-chairman.

Mohammad Masud and Maruf Alam were elected chairman and vice-chairman respectively.

The same day, Mohiuddin Khan Alamgir, a ruling Awami League lawmaker and former minister, resigned as the bank's chairman. The bank's audit-committee chairman and director, Mahbubul Haque Chisty, alias Babul Chisty, also stepped down.

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.

On January 14, Chowdhury Nafeez Sarafat was elected the new chairman of the Farmers Bank, replacing Mohammad Masud.