The government has no intention yet to inject fresh funds into the state-owned banks, especially Sonali Bank, and bail them out of the fund crunch they were suffering after a recent series of financial scams.
“We’ve no intention to fund Sonali Bank,” Banking Division Secretary Dr M Aslam Alam told the Dhaka Tribune yesterday.
The largest state-owned bank has been suffering from fund crisis since Bangladesh Bank identified a huge credit scam of around Tk36bn the bank lent to little-known Hall-Mark Group enterprises and few other business houses.
“We cannot give fresh fund to the banks as the taxpayers’ money may be drained out through big scam like Hall-Mark,” said the official.
He suggested the Sonali Bank authority to take initiative for recovering the money misappropriated through inland bills purchase (IBP).
A high official of Bangladesh Bank, however, said the government would have no option but to inject fresh funds to increase the bank’s capital.
According to Finance Division, the bank’s total capital at some point stood at around Tk24bn, but the credit scam of Tk36bn affected its fund flow. The bank needs same amount of money for its recapitalisation, officials said.
Banking Division sources informed that the government has been trying to arrange a loan from its subsidiary of Sonali Exchange, which is incorporated in the UK.
As a state-owned bank, Sonali does not require maintaining the Basel II obligations as the government ensure the guarantee for the depositors’ money of around Tk340bn.
Another high official of Bangladesh Bank said that the Hallmark scam has created lack of confident of businessmen on Sonali Bank. As a result, most of the foreign and local commercial banks were not accepting the inland bills from Sonali Bank.
“If the government does not inject fresh fund, the clients’ confidence will erode further,” he added.
Meanwhile, the International Monetary Fund, said last month that the government should inject fresh capital into the SoBs to bail them out of the crisis.
“Recapitalise the state-owned banks in FY14,” said the multilateral lending agency in a letter to the government, following the visit of its delegation to Dhaka early this month.
The IMF also advised the government to formulate a strategy for strengthening the SoBs, including Sonali and BASIC Bank, after making a ‘special diagnosis’ by next June.
The IMF team visited here to assess the overall economic situation of the outgoing fiscal year as part of their Extended Credit Facility deal with the government.
The team members said that recapitalisation of the SoBs should aim at covering the fund shortage being faced by them.
The SoBs have landed in a serious fund constraint after being swindled by certain vested quarters, they observed.
The fund embezzlement by Hallmark Group from Sonali Bank’s Ruposhi Bangla Hotel Branch early last year could be described as the single biggest financial fraud in the country’s history.
Finance Minister AMA Muhith on February 26 told parliament that eight state-owned specialised and private commercial banks had a total capital deficit of about Tk71.5bn as of September 30, 2012.
Officials said the situation deteriorated further as Bangladesh Bank unearthed unreported default loans to the tune of about Tk43.6bn in the four state-owned commercial banks – Sonali, Janata, Agrani, and Rupali.