BASIC Bank has signed a Memorandum of Understanding (MoU) with Bangladesh Bank to help revive the bank from the current financial crisis it is facing.
BASIC bank signed and sent back the MoU proposal yesterday to the central bank, a day before the scheduled time, BB sources said.
Earlier on June 18, BB asked the bank to sign the MoU by July 7 and then extended the deadline till July 17.
A high official from Bangladesh Bank said from now on the central bank could monitor the bank closely to help it revive from the current ailing situation.
BASIC Bank will have to make up its capital shortfall completely by December under the terms set in the MoU.
The proposed MoU that contains 26 conditions stipulates that BASIC Bank must improve its capital to 11% of its risk-weighted assets while its asset growth should not exceed the capital growth. In addition the credit growth must not exceed the deposit growth.
The bank’s classified loans should be reduced to 5% of the total loan by December from the existing 17% while its credit growth should not exceed 10% annually and 2.5% quarterly.
The bank will also be asked to realise Tk2.12bn which is 30% of Tk7bn classified loans – by December. All the classified loans of the bank’s Dilkhusha, Gulshan and Shantinagar branches are required to be recovered by December.
An inspection run by Bangladesh Bank found many irregularities in four specific branches – Motijheel, Shantinagar, Dilkusha and Gulshan – of the state-owned bank involving loans of nearly Tk45bn during December 2009-November 2012. The Gulshan branch alone sanctioned loans of Tk15bn mostly without proper scrutiny.
BASIC Bank gave loans to non-existent companies and promptly approved loans after they had opened accounts.
In addition, the bank’s board sanctioned several loans even before the concerned branches sent those loan proposals to its headquarters.
The bank’s top management had been aware that many borrowers diverted their funds willfully yet still failed to take any action against those borrowers.
