Scam hits Basic Bank

Basic Bank

Taking out loans with forged documents is so easy in Bangladesh that fraudsters don’t want to miss out on any opportunity.
The issue has come to the fore again with a recent scam at Basic Bank that approved loans of Tk 4,500 crore, mostly without proper documents and scrutiny. The bank’s board and top management were found to have helped the culprits steal the money.
The Basic Bank scam rattled the financial sector, which is still feeling the pinch of a Tk 3,500 crore scam by Hall-Mark and five other companies between 2010 and 2012.
A Bangladesh Bank inspection found many irregularities in four branches of state-owned Basic Bank — Motijheel, Shantinagar, Dilkusha and Gulshan branches — that involved loans of nearly Tk 4,424.93 crore between December 2009 and November 2012.
Of the amount, Tk 1,594.73 crore was given by the Gulshan branch, and majority of the loans was issued without proper scrutiny.
The bank gave loans to nonexistent companies and promptly approved loans to clients instantly after they had opened accounts. Moreover, the bank’s board sanctioned loans before the branch sent the proposal to the bank headquarters.
Though the bank’s top management had been aware that many borrowers diverted their funds at will, it did not take any action.
In violation of banking rules, the state-run bank showed interests as income against many loans that had not been paid.
Though Bangladesh Bank first came to know about massive irregularities in Basic Bank in September 2011, it did not take any regulatory action against the people responsible.
The central bank now proposes signing a memorandum of understanding with the troubled bank, which some senior central bankers view as a move to spare the culprits.
Mahfuzur Rahman, executive director and spokesman of the BB, declined to comment on the issue, and asked The Daily Star to talk to the central bank governor or deputy governors.
Abu Hena Md Razi Hasan, deputy governor of BB, told The Daily Star that the banking company laws prevented them from taking any action against the board or the managing director of state-owned banks.
“We can take action against private banks only,” said Hasan.
If the central bank finds any irregularities in state-owned banks, it seeks explanation from the board and the management, and then sends the documents to the government, he said.
“The issue of signing a MoU comes up when the performance of a state-run bank continues to deteriorate,” said the deputy governor, explaining the BB’s latest move to rescue the troubled bank.
BB inspection report shows Basic Bank issued loans of Tk 45 crore to AB Trade Link and another Tk 112 crore to Ma Tex, EFS Enterprise and SPN Enterprise. All the four organisations are nonexistent.
The central bank found clear involvement of the board of directors in the loan scam of AB Trade Link. The board approved the loan on September 6, six days before the bank’s branch concerned sent AB Trade Link’s proposal to the head office on September 12, 2011.

Source: The Daily Star