After formation of a new board of the scam-hit BASIC Bank, the central bank would soon lift lending restriction on its three branches – Gulshan, Shantinagar and Dilkusha.
Bangladesh Bank (BB) would soon sign a MoU (Memorandum of Understanding) with the newly formed board to set the loan limit for those branches to Tk1,600 crore till December this year, a high official of Bangladesh Bank said.
“We have already made a policy decision to withdraw the lending restriction on the branches as the BASIC bank is going to be run by a fresh board soon,” he said. “The decision would be finalised as soon as the governor returns home from abroad.”
Bangladesh Bank imposed the restriction on May 26 as the earlier board of the bank was sanctioning loans through the branches despite the central bank’s warnings.
It had also asked the branches to take prior permission of the central bank before disbursement of any loans already granted.
Of the total 68 branches of the bank, the suspended three branches hold 61% loans of the total outstanding, according to Bangladesh Bank data.
The amount of total disbursed loan of BASIC Bank stood at Tk11,180 crore in March this year, of which Tk6,900 crore had been disbursed through the three branches.
The Bank and Financial Institutions Division under finance ministry on July 6, dissolved the board of directors of the bank and appointed Alauddin A Mojid as it chairman. The bank got new four directors on July 7.
Bangladesh Bank is also going to fix a set of conditions of the banking activities through signing a MoU with the new board.
According to the new MoU conditions, the loan growth of the bank will be 16% of an adjusted loan of Tk10,192 crore in December 2013. The new loan growth will be set for this year, till December 2014 although 6 months have already been passed.
The MoU was supposed to be signed in January this year, but it has been delayed as the action taking procedures against the Managing Director and other officials of the BASIC bank is still underway, said a senior executive of Bangladesh Bank.
Though a set of new MoU proposals were sent to the previous board several months ago, but the board did not sign it, rather, the board had sent them back to the central bank with some observation on the bank activities, requesting for higher credit growth from the proposed 16% by BB, he said.
“The governor, however, did not accept their credit growth request, rather instructed us not to send any proposal further until the formation of new board.”
The classified loan recovery will be set at 20% for this year from the recovery status of December last year, according to a condition of the MoU.
The total classified loan of the bank increased by 99% to Tk2,557 crore in March, this year from Tk1,282 crore in December last year.
The default loans of BASIC Bank was growing abnormally fast in the previous months as loans the bank had disbursed through irregularities were getting matured.
The amount of new classified loan was Tk217 crore in December last and it rose to Tk344 crore in January, Tk404 crore in February and Tk1,539 crore in March, according to the latest statement (unaudited) of BASIC Bank submitted to Bangladesh Bank.
The amount of classified loan of the bank, however, growing fast but the recovery is very slow. The total loan recovery of the bank had increased only by 5% to Tk150 crore in March from Tk143 crore in December last year.