Earlier, the Bangladesh Bank had advised the clients of BASIC Bank to withdraw their deposits on their own judgement
The new management of BASIC Bank have expressed concerns that some of its biggest clients might withdraw their deposits of around Tk9,126 crore from the bank fearing possible harassment from the Anti-Corruption Commission and audit objections.
In letters to Finance Secretary Mahbub Ahmed and Bank Division Secretary Aslam Alam last week, BASIC Bank’s acting managing director Kanok Kumar Purkayastha sought directives on how to persuade 46 government and semi-government organisations against withdrawing their funds from the scam-hit bank.
The letter says there is a lack of confidence among depositors because of the bank’s weak financial status and negative media coverage prompting some depositors to attempt to withdraw funds from the state-owned bank. Besides, some of the depositors had already withdrawn funds from the bank during the last three months.
The acting MD also expressed concerns that BASIC Bank would face severe liquidity crisis because of the large amounts of money being withdrawn, especially at the three branches in Dhaka city.
Earlier, the Bangladesh Bank had advised the clients of BASIC Bank to withdraw their deposits on their own judgement.
A total of 46 government and semi-government organisations each have more than Tk50 crore deposited in the trouble-riddled bank, with their total deposit standing at Tk9,125.68 crore.
Of the total deposited amount, Tk642 crore belongs to Bangladesh Export Processing Zone Authority (Bepza), Tk631 crore belongs to Jamuna Fertiliser Company, Tk595 crore to National Housing Authority, Tk501 crore to Sylhet Gas Fields Limited, Tk488 crore to Karnaphuli Gas Distribution Company, Tk457 crore to Rajdhani Unnayan Kartripakkha (Rajuk), and Tk422 crore to Titas Gas Transmission and Distribution Company.
Seeking anonymity, a top official of the Bangladesh Bank recently told the Dhaka Tribune that the financial situation of BASIC Bank might not have become so bad had the ACC taken action against the bank’s former MD and chairman a year ago when the central bank sent its financial corruption report recommending legal action against the duo.
Now the specialised bank might face bankruptcy and collapse as the Lehman Brothers Bank in the US did in 2008, he said, adding: “Eight years ago, Oriental Bank collapsed because most of its clients withdrew money from the bank.”
In June, Bangladesh Steel and Engineering Corporation (BSEC) Chairman Md Imtiaz Hossain Chowdhury sought advice from both the Finance Division and Bangladesh Bank on withdrawing its fixed deposit return (FDR) from the BASIC Bank.
“We are worried about saving the corporation’s FDR fund in the wake of misappropriation of a large amount of money at BASIC Bank,” reads a letter from the BSEC chief.
The BSEC also expressed concerns that its officials might be harassed during ACC’s investigations because of the corporation’s large FDR fund at the bank.
According to a Finance Ministry report, deposits at BASIC Bank declined by Tk997.56 crore in the first six months this year as depositors gave the state-owned bank the cold shoulder after the Bangladesh Bank had detected huge irregularities at the bank.
Bankers said the depositors lost confidence in the BASIC Bank after the central bank unearthed that it disbursed more than Tk4,500 crore in loans in the last few years, violating rules and regulations.
The ministry report, submitted to the parliamentary standing committee on public undertakings last month, shows that deposits at BASIC Bank dropped to Tk12,451.78 crore as of June 30 from Tk13,449.34 crore in December 31, 2013.
Bank Division Secretary Aslam Alam, however, told the Dhaka Tribune yesterday that the clients of BASIC Bank had regained confidence in the bank after the dissolution of its board of directors and the removal of the chairman and MD and there was no concern about clients withdrawing their funds at the moment.
The secretary also claimed that the bank’s capital shortfall would be raised from the existing amount of around Tk1,400 crore after auditing by the central bank.
Last month, BASIC Bank again sought Tk1,372 crore from the Finance Division to meet its capital shortfall, which the bank said was “severely impeding regular activities” of the bank.
The BASIC Bank’s capital shortfall stood at Tk1,037 crore at the end of March this year. At the end of last year it was Tk1,372 crore, of which the provision shortfall and reserve was Tk1,176 and the rest was reserve capital.
In 2012, BASIC Bank’s shortfall was only Tk3.34 crore.
A letter from the bank’s acting MD to the Bank Division secretary reads that if the bank had followed Bangladesh Bank guidelines for risk-based capital adequacy, the capital shortfall would have crossed Tk2,000 crore.
After the dissolution of the BASIC Bank board, the first meeting of the newly appointed board on July 14 revealed that the bank was now facing difficulty in foreign trade, suffering poor CAMELS rating – a supervisory rating system to classify a bank’s overall condition – and credit rating, which have resulted in sinking the clients’ confidence to the lowest level.
Source: Dhaka Tribune
