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Ailing BASIC Bank gets another Tk1,000cr

  • Published at 05:48 pm June 14th, 2017
  • Last updated at 11:00 am June 15th, 2017
Ailing BASIC Bank gets another Tk1,000cr
The Finance Division of the Ministry of Finance issued a government order on Wednesday to disburse Tk2,000cr for the recapitalisation of five banks. As per Finance Minister AMA Muhith’s directive, the recapitalisation fund is targeted to recover client trust in BASIC Bank. The bank lost a huge amount of goodwill due to large-scale corruption. Earlier, the minister said BASIC Bank's former chairman Sheikh Abdul Hye Bacchu was involved in the loan scam, he also said: “It cannot be compared with other banks.” basic-chart BASIC bank has received Tk2,390cr under the government's recapitalisation programme over the past five years. The latest Tk1,000cr brings it up to Tk3,390cr over six years.

The BASIC scandal

In the financial scams that took place between 2011 and 2013, three of these banks — Sonali, Janata and BASIC — had lost Tk12,000cr. A Bangladesh Bank inspection detected many irregularities in four branches of BASIC – Motijheel, Shantinagar, Dilkusha and Gulshan – involving loans of around Tk4,425cr taken out between December 2009 and November 2012. As the bank fell into severe financial crisis after the largest loan scam, the government dissolved the board of the bank in 2014. Later on, a new board took over the charge of bank and adopted a fresh strategy to revive the bank from a possible collapse. Deputy Managing Directors Fazlu Sobhan and Mohammad Selim, and former Deputy General Manager Shiper Ahmed were imprisoned for embezzlement. Another Deputy Managing Director Abdul Monayem Khan was fired in November 2016, two and a half years after his involvement in the scam came to light.

To recuperate losses or to save face?

The financing is part of the proposed budget of the fiscal year 2017-2018 announced by Muhith on June 1. Earlier on May 17, Muhith said BASIC Bank needs “special nurturing” to operate. BASIC Bank is running its Letter of Credit (LC) business with the help of Sonali Bank. Several state-owned and privately-owned banks were involved in loan scams According to the Finance Division working papers, the capital shortfall of the BASIC Bank is Tk1,934.5cr while the capital reserve ratio was only 7.55% in 2015. A Finance Division offical said: “There is no justification in providing BASIC Bank with Tk1,000cr. It has only 72 branches. "The money would have been better spent if it was used to recapitalise the 1,207 branches of Sonali Bank," the Finance Division official said.