We can hardly be surprised by reports that the scam-hit state-owned BASIC Bank is allegedly using political influence to get Tk2,000cr from the national exchequer to meet its capital shortfall.
It is an inevitable consequence of the policy of successive governments in committing large sums to keep state-run banks afloat.
BASIC Bank was excluded from international business in 2012 following the exposure of large irregularities and has also been blacklisted by Sonali Bank. Its still weak balance sheet shows no evidence that it has been able to undertake the reforms needed to end its losses or justify getting further funds.
It is clearly not acceptable that it should be applying political pressure to obtain further funds before the new fiscal year starts in July, when its management is continuing to flout prudent rules designed to limit bad loans and safeguard capital.
The government should act to shut BASIC Bank down in an orderly manner, so as to end taxpayer losses and send a message to other loss making state banks.
As a first step, Bangladesh Bank should limit injections of money to the amount required to ensure depositors can be given their money back, to prevent a run on the banking system.
BASIC Bank employees should then be retrenched and the depositors funds given back so the bank can be wound up.
Non-classified loans can be transferred to a better managed state owned or private bank. The government should create a special purpose institution to which BASIC’s classified loans can be be transferred and task it with the purpose of pursuing the defaulting borrowers in the courts.
This is the only realistic method by which the government can break the cycle of BASIC Bank’s losses.
