Shortfall now over Tk 34 billionBASIC seeks fresh fund for capital replenishment

FT ONLINE

Scam-hit BASIC Bank has requested the government to make available a fresh fund worth Tk 25 billion to meet its huge capital shortfall urgently, officials concerned said.

Managing Director of BASIC Bank Muhammad Awal Khan in a letter to the Ministry of Finance on February 18 last made the request, they added.

"We have sought an allocation of Tk 25 billion from the government for BASIC Bank to reduce its capital shortfall. The bank needs fresh injection of a huge amount of funds urgently," a source in BASIC Bank Ltd said on Tuesday.

"We have received the proposal sent by the specialised bank, seeking funds to meet its capital shortfall," a senior official of the banking division said.

When contacted, Mr Awal Khan said, "Some state-owned banks (SoBs) have requested the government to provide funds. We have also sought fund to meet capital shortage."

Data available until December last show that BASIC Bank suffered capital inadequacy worth over Tk 34.10 billion.

Officials of the banks said they immediately need recapitalisation to strengthen their capital base, restore depositors' confidence and maintain minimum capital requirement in line with Basel-III guideline.

The government provided the bank with funds between fiscal years (FYs) 2013-2014 and 2016-2017 to meet its capital shortage.

In the past, the bank was given Tk 23.90 billion to meet its capital shortage. Tk 12 billion and Tk 10 billion were given to the bank in 2015 and 2017 respectively for capital replenishment.

In recent years, loans were sanctioned without following rules properly which resulted in increased volume of classified loan, negative shifting of the level of classified loan and erosion in the value of collateral given against loans, according to a senior official of the bank.

This is why, he said, the provisioning requirement has increased against classified loans.

In September 2009, Sheikh Abdul Hye Bachchu was made chairman of BASIC Bank. The government appointed him on contractual basis for three years. Later, his tenure was extended for two years in September 2012.

After his appointment, the bank's performance started deteriorating as Sheikh Bachchu and other directors of the board allegedly indulged in "gross irregularities in sanctioning loans in violation of rules and regulations of Bank Company Act", according to sources in BASIC Bank.

The government dismissed the board of directors of the bank in 2014.

Some Tk 35 billion in loans had allegedly been illegally disbursed from Gulshan, Dilkusha and Shantinagar branches of the bank between 2009 and 2011, the Bangladesh Bank's findings showed.

Presently, the problem-ridden bank has taken a three-year plan of action including various initiatives to reduce its huge amount of default loans at a tolerable level.