Bangladesh Bank has posted an observer in the problem-ridden BASIC Bank to ensure enforcement of prudential regulations and help revive the bank from continuous financial deterioration.
The central bank took the decision and issued an order in this regard on Wednesday, deputing General Manager Ashok Kumar Dey of the Department of Banking Inspection as the observer with immediate effect.
Ashok Kumar Dey has been assigned to attend all the board meetings of the bank and observe the audit reports.
Bangladesh Bank signed a MoU (memorandum of understanding) with the bank on July 17 due to capital inadequacy, provision shortfall, continuous deterioration of profit, high rate of advance-deposit ratio, aggressive on loan disbursement, approval and renewal of loans, huge irregularities on loan rescheduling and lack of corporate governance in management.
The bank fell on risk due to failure in compliance of prudential regulation in every case.
But, the bank failed to recover its financial health following the condition of MoU, rather all financial indicators deteriorated during July to September period.
Bangladesh Bank recently held a meeting with BASIC Bank internally to review the bank’s financial situation. After the meeting, the Bangladesh Bank took the decision to post an observer in the bank, said a Bangladesh Bank senior executive.
According to latest data, capital shortfall of the bank rose to Tk6bn during July-September period from Tk1.82bn.
Provision deficit increased around 50% to Tk3bn from Tk2bn and non-performing loan increased to Tk18bn from Tk9bn.
The proposed MoU that contains 26 conditions stipulates that BASIC Bank must improve its capital to 11% of its risk-weighted assets while the asset growth should not exceed the capital growth. In addition, the credit growth must not exceed the deposit growth.
The bank’s classified loans should be reduced to 5% of the total loan by December from the existing 17% while its credit growth should not exceed 10% annually and 2.5% quarterly.
The bank will also be asked to realise Tk2.12bn which is 30% of Tk7bn classified loans by December.
All the classified loans of the bank’s Dilkhusha, Gulshan and Shantinagar branches are required to be recovered by December following the MoU.