Misdeeds at BASIC Bank

Top auditor finds anomalies cost the state bank Tk 100cr

The BASIC Bank rules did not allow a branch manager to create any temporary overdraft (TOD) opportunity in favour of current account holders without approval from the head office.

But that is exactly what the bank's Gulshan branch manager did in 2005.

The manager made more funds available to a client, PC Avenue, than its existing credit facility permitted. The client borrowed Tk 2.6 crore from 2005 to 2008.

The head office set PC Avenue a deadline to clear the debt, but the client failed to do so.

Even after that, instead of blocking PC Avenue's accounts, the branch went ahead to let it enjoy more TOD privileges, which the Office of Comptroller and Auditor General (OCAG) viewed as misappropriation.

PC Avenue's case was not an isolated incident, though; the branch did the same for Titan Apparels in 2009, lending Tk 20 lakh more than the client's credit limit.

The branch then provided a short-term loan of Tk 36 lakh to Titan Apparels without taking any permission from the head office.

Furthermore, without adjusting that liability, the branch approved another short-term loan of Tk 2.4 crore for the client. The client then failed to export goods against back-to-back letters of credit, so a forced loan of Tk 1.03 crore was created.

The loans and interests accumulated to a Tk 5.99 crore fund for Titan Apparels due to the branch's transgressions.

Such illegal action in both the clients' cases created liabilities amounting to Tk 13.6 crore, which, in other words, were misappropriation of the bank's money.

And this is only a part of the Tk 100.42 crore the state-run bank lost due to anomalies.

The accounting watchdog raised 13 objections in audits in 2010 into BASIC Bank's Bangshal, Dilkusha, Karwan Bazar, Uttara and Gulshan branches.

Amid lax internal control and auditing, officials of these branches issued a number of loans between 1997 and 2010, exceeding the credit limits and violating Bangladesh Bank's instructions.

BASIC Bank's Bangshal branch lent Tk 42.86 crore to MR Steel Mills Ltd without creating registered mortgage and following other key conditions, said the 2009-10 OCAG report.

Similarly, the bank's principal branch in Motijheel is facing a loss of Tk 16.96 crore from loans it disbursed to two clients in spite of mortgage deficit.

Without the mandatory down payment the bank gave the clients the chance to repay the loans by extending the time limit, but the clients failed to do so.

Likewise, the bank's Dilkusha branch lent Tk 13.48 crore to Shah Islam Construction and its associate Mrs A&Z — without valid mortgage documents.

The construction firms completed the projects for which the loans were taken, but they did not pay back the bank.

An audit shows how the Uttara branch breached instructions of the headquarters to lend Tk 1.92 crore.

Like the Gulshan branch, it provided TODs to Saifullah Properties Ltd and Motherland Sweater Industries Ltd — none of them had any money in their accounts.

Contacted, BASIC Bank's Managing Director Kazi Faqurul Islam acknowledged the Bangshal branch's misdeeds.

“But I am unable to confirm the other branches' irregularities at this moment,” he told The Daily Star last week.

The bank had already taken some actions against the officials involved, Faqurul said, adding: “We have also asked for explanation and information.”

He said these anomalies had taken place before he took over as the chief executive of the bank in June last year, but he would appear before the Public Accounts Committee if asked.

In the wake of the Hall-Mark loan scam involving another public bank (Sonali Bank), the BASIC Bank board has strengthened internal control, credit management and risk management in line with the central bank's instructions, Faqurul added.

Source:The Daily Star