BASIC Bank will have to bring down its classified loan to 15% of its total outstanding loans by June 2015, as Bangladesh Bank has sent a proposal of memorandum of understanding to new board setting the condition.
The central bank has fixed a set of conditions of the banking activities in its MoU proposal to bring the bank under strict monitoring, which was already sent to the bank last week for signing.
The MoU conditions, however, were supposed to be set for fulfillment by December this year. The time has been extended till June 2015 following request of the new board, said a senior BASIC Bank official.
The default loan of the state-run BASIC Bank rose by Tk2,034 crore and stood at Tk4,500 crore in June, which was 40.77% of its total outstanding loans.
It was 29% of total outstanding loans in December last year.
According to the proposed MoU conditions, the cash recovery target against classified loans has been set at Tk630 crore which is 20% of total classified loans of Tk3,145.53 crore. The total figure is as of December 2013.
Of the amount of Tk630 crore, Tk400 crore will have to recovered from top 20 defaulters and Tk230 crore from other defaulters.
The default loans of BASIC Bank has been growing abnormally fast in the recent months as loans the bank had disbursed through irregularities are getting matured, said a senior executive of Bangladesh Bank.
While the facility of relaxed loan reschedule policy remained, the default loans of the bank increased abnormally in second quarter of 2014.
This was because the clients could not reschedule loans even taking advantage of the policy due to their disability of paying 5% down payment, the official said.
Banks’ total default loans rose Tk3,183 crore in the three months of which BASIC Bank accounted for almost 64% of the rise, according to the central bank data.
Although the central bank set the condition of bringing down the classified loans to 15% to control the increased trend, it will not be possible for the bank to maintain it by June as huge loans are already close to be classified, said a senior BASIC Bank official.
The bank will have to make up its capital shortfall of Tk1,372 crore by June 2015, according to the condition.
The new board already has sought that amount to meet the shortfall from Finance Division.
The central bank set the time-frame for the BASIC Bank to meet shortfall so that they can put pressures on Finance Division for fund, said another senior official of Bangladesh Bank.
The existing shortfall of the bank might rise rapidly in June, he feared.
According to the proposed MoU, the loan growth of the bank will be 16% of an adjusted loan of Tk10,192 crore in December 2013.
The new loan growth is yet to be set for the year ending in December although six months have already passed.
The bank is allowed to disburse loans up to Tk200 crore in SME sector by the end of this year beyond the 16% growth limit.
But the single borrower exposure limit will not exceed Tk1 crore.
