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29 May 2014   09:25:50 PM   Thursday BdST A- A A+ Print this E-mail this

BB Order: Dissolve BASIC Bank board

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The management of another state-run bank came under fire for mismanagement as the central bank Thursday recommended that the finance ministry dissolve the board of directors of BASIC Bank for lending anomalies that cost its MD his job.
Earlier, the board of directors of scam-ridden Sonali Bank was toppled following the biggest-ever loan fraud committed by a little-known business cartel, Hall-Mark.        
With this edict Bangladesh Bank sent a letter to the ministry, sources said.  
The recommendation came three days after the central bank fired the BASIC Bank Managing Director, Kazi Faqurul Islam, for serious irregularities at the bank. 
 BB investigations found that the bank`s Gulshan branch extended a fresh loan of Tk 50 crore to a default borrower, Delta System Ltd, in breach of the Bank Company Act, said the letter.
Upon learning of the transgression, BB straightaway sent instructions to classify the loan, which BASIC Bank failed to act on. “That was a complete disrespect to the central bank directive,” said the letter.
Also, a further Tk 30 crore loan was extended to the same client.
To show the financial health of the bank to be better than it is, BASIC Bank showed a host of classified loans to be regular ones—again a grave offence.
The bank also promoted its two general managers--Ruhul Alam and Md Selim--to deputy managing director by “violating rules”.
Copies of the letter were forwarded to BASIC Bank`s chairman and the finance ministry`s banking division as well.
One of the best-run banks until 2009, the BASIC Bank has been mired in financial irregularities in recent years.
According to reports, the BB investigators found 12 counts of irregularities by BASIC Bank in giving out loans, which include no verification of customer`s creditworthiness, absence of KYC procedures, and fresh lending to defaulters.
The majority of the anomalies were detected in the bank`s Dilkusha, Shantinagar and Gulshan branches in Dhaka.
In a bid to check the irregularities, the BB had signed a memorandum of understanding with BASIC Bank in July last year, where the bank pledged to execute a number of actions by December 2013.
The agreement obliged BASIC Bank to limit its single borrower exposure to 15 percent of the bank`s total capital, but it overshot the ceiling for 61 of its clients, giving out Tk 2,111 crore more in loans than it should.
BB stipulated that the bank raises its capital adequacy ratio (CAR) to 11 percent by the end of 2013. The CAR on December 31 last year stood at 4.5 percent.
It was also supposed to make up the capital shortfall of Tk 128.21 crore in 2013, but in reality, the capital deficit widened to Tk 647.38 crore by the end of December.
The state-owned scheduled bank also fell short in cash recovery last year: it was supposed to be a minimum of Tk 212 crore but BASIC Bank managed Tk 142.82 crore.
The troubled bank`s non-performing loan ratio by the end of 2013 needed to be 5 percent, but it stood at 11.72 percent.
Another target was to transform the loss-incurring branches into profitable ones during the course of the year, which, again, it failed to. Of the total of 68 branches, 33 remained loss-making.

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