Photo : Collected
The news of merger with a private bank has caused a stir among BASIC Bank clients as they have withdrawn Tk 2,500 crore from the state-owned financial institution.
As a result, the bank is facing an extreme liquidity crisis. It is unable to borrow from other banks while the central bank is not providing any special support either. There is a fear that the bank may fail to successfully process customers’ withdrawal requests at any moment.
In light of the situation, the bank's Managing Director and CEO Md Anisur Rahman has written to the government seeking assistance. Copies of the letter, which also highlighted the bank’s plights. were sent to the secretary of the Financial Institutions Division, the cabinet secretary, the principal secretary, and the governor of the Bangladesh Bank on May 7.
The Bangladesh Bank is not willing to provide any further assistance to BASIC Bank. This is a strict message for the bank, which showed reluctance to merge. When contacted, the MD of the bank refused to speak. The chairman also did not respond to the phone.
The BASIC Bank letter said various government offices, departments, and institutions had written to the bank seeking the withdrawal of more deposits. In the current situation, deposits cannot be availed from any other source. Apart from that, individual deposits are being withdrawn at an abnormally high rate as well
At present, there is no opportunity for the bank to borrow money from the central bank through bonds or it has ended. Money cannot be borrowed from the inter-bank call money market either, creating a severe liquidity crisis. As a consequence, the amount of deficit in statutory liquidity ratio (SLR) of the bank has increased to about Tk 1,800 crore, the letter said.
The bank said if the situation continues, it will soon fall into a deeper crisis, which will have a negative impact on the entire banking sector. Apart from this, if the situation cannot be dealt with, paying employee salaries and allowances will become uncertain.
The letter said as a government-owned bank, it collects about 80 per cent of the deposits from government sources. Most of the deposits of government entities have high interests. The bank is facing losses despite the good performance of its core business indicators due to high default loans and high-interest deposits. As a result, there is a shortage of security balance and capital.
To tackle the crisis, the bank made several proposals to the government. It said a letter can be sent to various government institutions and offices on behalf of the government, saying that BASIC Bank is a government-owned bank and deposits in the bank are risk-free as well as safe. Advice and guidance on keeping deposits can be given to government institutions. Necessary measures can be taken to provide policy support, including the provision of low-interest deposits from the government. The government's position as the bank’s owner in the wake of the news on merger can be clarified.
Once upon a time, well-to-do businessmen were clients of BASIC Bank. As the bank had efficient management and offered good facilities for employees, many talented students were interested in working there.
The bank began to go downhill in 2009 after the appointment of former lawmaker Sheikh Abdul Hye Bacchu as the chairman. His term was extended though irregularities were evident. During his 2009-14 term, funds were misappropriated through unprecedented irregularities.
This prompted the Bangladesh Bank to take the initiative to merge the bank. 64 per cent of the loans given by BASIC Bank are default loans. In the last 10 years, the bank’s loss increased to Tk 4,230 crore.
Messenger/Fameema
