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Cash-strapped Sonali Bank wants to issue rights share

  • Published at 05:39 am May 16th, 2013
Cash-strapped Sonali Bank wants to issue rights share

The state-owned Sonali Bank has sought the banking division permission to issue rights share to enhance its capital base.

Finance Minister AMA Muhith is now examining the proposal to rescue the country’s largest commercial bank from cash crunch it is suffering since the Hall-Mark Group credit scam, said a senior official of the banking division.

He said the government has enough liquidity to make up the capital shortage, which is necessary to comply with the Basel –II conditions.

Basel II means bank capitalises on the modern risk management techniques and seeks to establish a more risk-responsive linkage between the banks operations and their capital requirements.

Latest data shows that Sonali Bank’s liquidity deficit increased to Tk50bn, including a provision deficit of Tk35bn and capital deficit of Tk15bn.

At present, total bad debt of the Sonali bank stands at Tk117bn from Tk70bn four months ago.

Sonali Bank Managing Director Pradip Kumar Dutta told the Dhaka Tribune that the finance minister did not respond to a previous proposal to inject more fund for raising the capital base. So, we submitted proposal of issuing rights share to solve the problem.

He apprehended that the bank would face acute cash crisis in near future unless the banking division approves the rights issue proposal.

The country’s largest state owned commercial bank has been converted to a Public Limited Company with 100% ownership of the government and started functioning as Sonali Bank Limited from November 15, 2007 through taking over all assets, liabilities and businesses.

After the corporatisation, the management of the bank has been given required autonomy to make the bank competitive and to run its business effectively.

Sonali Bank Limited is governed by a board of directors consisting of 11 members. The banks authorised capital is Tk20bn and paid up capital is Tk11.25bn.