BB fails to rescue some specialised, private banks

Bangladesh Bank (BB) failed to save some specialised and private banks which are on the verge of closure, though none of them reached this situation in a day or two or in one year.

According to the economists, these banks could have been saved if correct steps were taken at the right time.

A number of these banks could have been brought back from the brink of collapse if their condition was properly identified and their  weaknesses were investigated.
 
It was Bangladesh Banks responsibility to identify why and what caused this condition to the banks, they said, adding, but it was not done.

They blamed the weakness of the central bank for this situation.
 
Bangladesh Commerce Bank, Oriental Bank are currently running using the name of ICB Islami Bank.

When Shilpa Ren Sanstha went down it was merged with Bangladesh Shilpa Bank and renamed as Bangladesh Development Bank (BDBL).

As BDBL was struggling, it signed a Memorandum of Understanding (MoU) on  March 12 to get merged with state owned Sonali Bank.
 
Industrial Credit Corporation, Shilpa Rin Sanstha, Bangladesh Shilpa Bank and BDBL now merged with Sonali Bank PLC.

Now, Padma Bank, National Bank, Rajshahi Agricultural Development Bank (RAKAB) and BASIC Bank are on the verge of collapse.

 When they were slowly sinking  Bangladesh Bank appointed observers without taking drastic measures, dissolved and replaced their  boards of directors.

At present, most of the board members of the National Bank are alleged to be representatives or members of S Alam Group.

Currently, BASIC Banks defaulted loans amount to Tk 8,204 crore - which is 63 per cent of the total loans it had disbursed.

And the safety reserve deficit is Tk 5,195 crore and the capital deficit is Tk 2,352 crore.

National Banks non-performing loans amount to Tk 12,368 crore - which is 29 per cent of total loans it had disbursed. Its security reserve deficit amounts to Tk 11,697 crore and capital shortfall amounts to Tk 1,379 crore.

BDBLs defaulted loans amount to Tk 982 crore - which is 42 per cent of the total loans it had disbursed.

Padma Banks defaulted loans amount to Tk 1,880 crore - which is 46 per cent of the total loans it had disbursed. Its capital deficit amount to Tk 497 crore.

RAKABs defaulted loans amount to  Tk 1,534 crore - which is 21 per cent of the total loans it had disbursed. RAKABs capital deficit amount to k 2,385 crore.

Economist Dr Qazi Khalikuzzaman told the Daily Observer that Bangladesh Bank could not properly investigate into these banks at the right time.

Even after investigation, no action was taken against the culprits, he said, adding if the offenders were penalised none would dare  commit such wrong later.

He said if the law was enforced, some of these banks would not have gone to the brink of collapse.
 
Regarding defaulted loans, he said, recovery of defaulted loans should be a priority.
 
Regarding big loans, he said, Bangladesh Bank has imposed restrictions on disbursement of big loans on two banks. This restriction could have been imposed earlier.  

A senior official of the National Bank told The Daily Observer that banking business thrives on image. If there is an image crisis, no bank can function. Moreover, if there is an image crisis, the customer does not keep his money but withdraws his deposit.

He said no bank can survive with losses.

He said that if you cannot take money from Bangladesh Bank and return it on time, you have to pay penalty. This increases the interest rate. And taking money with high interest and disbursing it with low interest is a losing proposition.

He said a bank cannot survive for long by adopting one policy inside it and another policy outside.

He said that the crisis in National Bank occurred due to Bangladesh Banks inaction.

Bangladesh Bank Spokesman and Executive Director Mezbaul Haque told The Daily Observer that several steps were taken against  National Bank. Debates are made, observers wee appointed, board was dissolved and replaced, but to no vail.

After Pubali Bank had gone down, Bangladesh Bank followed the directives of the board. Now Pubali is back to business.

The board of the National Bank did not obey the instructions of the central bank - so it suffered, just like the other banks that did not follow the central banks instructions.