The capital shortfall of troubled state-owned BASIC Bank has gone up to Tk303 crore during last the six months (December 2013 to June 1014) as no additional fund has been injected into the bank after the big scam.
In banking term, shortfall increases when a bank’s earnings go down with no back-up funds against loans given to the parties. Increasing shortfall is an indicator of bad performance of a bank.
Due to the huge capital shortfall, Basic Bank’s regular activities has been severely disrupted over the last couple of months, according to the last report on Basic Bank which will be placed before the parliamentary standing committee on finance ministry today.
According to the Bank and Financial Institutional Division’s latest report, the shortfall of Basic Bank stood at Tk1675.50 crore at the end of June 2014 while it was Tk1372.01 crore at the end of December 2013.
Capital shortfall of Basic Bank, now facing severe liquidity crisis, was only Tk3.34 crore in 2012, before a scandal amounting to Tk4,500 crore was detected.
“We fear that the capital shortfall in the bank may further increase if the central bank carries out a fresh audit,” Banking Division Secretary M Aslam Alam told the Dhaka Tribune.
“It is not possible to provide additional fund support to Basic Bank as the largest state owned bank such as Sonali, Janata and Agrani seek more funds to meet their capital shortfalls”, he said.
The Bank Division on July 5 dissolved the BASIC Bank board over its involvement in the scandal which Finance Minister Abul Maal Abdul Muhith termed a ‘dacoity’.
Last week, the new board of director of the Basic bank sought additional Tk1,372 crore to meet its capital shortfall from the finance division.
After dissolution of the BASIC Bank previous management, the first meeting of the newly appointed board on July 14 came up with the observation that the bank was facing difficulty in foreign trade with poor ranking among the local banks resulting in the drop of the clients’ confidence level to the lowest.
BASIC Bank is suffering from a huge capital deficit due to irregularities in distribution of loans over the last five years.
As according to the banking division report the classified loan went up to 40.38% at the end June 2014 while it was only 28.78% by 2013 end.
The classified loan means the money banks give to the defaulting clients. The banks have very slim chance of getting the money rated as classified loans back. In most of the cases, the classified loans turn into bad loans –a complete liability for the institute.
The percent age of classified loan was only 8.28 % at the end of 2012, says the latest report.
According to the report, the Banking Division suggested six measures for smooth restoration of financial discipline of the bank. These include detecting the banking officials who aided in the disbursement of the loans in violation of the banking rules and take legal and administrative actions against them.
Meanwhile, the new management of the bank has acted promptly. It instructed the five branches that gave loans in violation of the rule to make the loans regular.