Government agencies are pulling deposits from the state-owned BASIC Bank amid its financial struggles, with depositors having withdrawn nearly Tk 2,500 crore already, prompting the bank’s management to seek government assistance, sources within BASIC Bank have disclosed.
The government has been urged to take four specific actions to provide immediate assistance to address the urgent situation.
A letter has been addressed to cabinet secretary, principal secretary to the prime minister, Bangladesh Bank governor, and finance division secretary advising them to take necessary measures, sources said.
In the letter, BASIC Bank has warned that if the current situation continues, the bank is likely to face a severe crisis soon, potentially “impacting the entire banking sector negatively.”
Moreover, the bank cautioned that if the emergent situation is not managed, the payment of salaries and allowances to its employees could become uncertain.
Sources said that depositors are pulling out funds from BASIC Bank due to news of its impending merger with a private bank and potential dissolution being published in various media.
The crisis has escalated beyond the bank's control, making it impossible for BASIC Bank to handle the situation alone.
Therefore, specific actions are needed to address the problem. These include:
According to sources from the bank, there has been an unusually high level of deposit withdrawals from BASIC Bank following the publication of news on April 8 this year about its potential merger with a private bank.
Various depositors have already withdrawn approximately Tk 2,500 crore. Additionally, various state departments, directorates, and agencies have sent letters to the bank indicating further withdrawals.
Currently, the bank is not receiving new deposits from other sources, and individual depositors continue to withdraw funds at an abnormal rate.
The bank has also experienced a crisis of confidence among its customers, resulting in a shortfall in its Statutory Liquidity Ratio (SLR) reserves of about Tk 1,800 crore.
BASIC Bank Managing Director and CEO Md Anisur Rahman stated that the bank no longer has the option to borrow money from the central bank through bonds or repurchase agreements (repo), and is also unable to secure loans from the interbank call market.
Consequently, BASIC Bank is facing a severe liquidity crisis, he said.
Rahman further mentioned that BASIC Bank has never previously experienced a shortfall in its SLR or had cheques dishonoured.
He warned that if the current situation does not improve soon, there is a risk of cheques being dishonoured, which would completely undermine any remaining confidence in the bank.
According to bank officials, BASIC Bank had been performing well across various business indicators under the current board’s leadership,
The bank has ensured good governance with visible growth in imports, exports, and remittances.
Approximately $2 million is paid each month for the installment of the Bangabandhu Satellite and last year, the bank facilitated and paid a $21 million letter of credit (LC) for the Karnaphuli Gas Distribution Company Ltd.
Moreover, state organisations like the Bangladesh Chemical Industries Corporation, National Tubes Ltd, and Pashchimanchal Gas Company Limited regularly open import letters of credit with the bank, most of which are funded from the bank’s own resources.
Over the past three years, BASIC Bank has recovered Tk 563 crore from classified loans, with no new loans distributed during this period becoming classified.
The number of loss-making branches has reduced from 32 to 17 out of a total of 72 branches due to cost-cutting measures, leading to a decrease in operational expenses. The loan-to-deposit ratio has also improved, decreasing from 115 per cent to 85 per cent.
BASIC Bank, a government-owned entity, has been operating as a reputable bank since 1992. However, between 2010 and 2014, irregular loan distributions led to a significant amount of loans becoming classified, causing a crisis of confidence in the bank and making it challenging to collect deposits from individuals.
Approximately 80 per cent of BASIC Bank's total deposits are collected from government sources. Regular deposits are maintained by several state departments and agencies, including the Bangladesh Power Development Board, entities under the Energy and Mineral Resources Division, Bangladesh Chemical Industries Corporation, Shahjalal Fertilizer Company Ltd, Jamuna Fertilizer Company Limited, and Titas Gas Transmission and Distribution Company Limited, among others.
Most of these deposits from governmental bodies are high-interest-bearing.
The Anti-Corruption Commission (ACC) filed charges in July last year against 148 individuals in 59 cases of loan fraud involving around Tk 3,500 crore at the state-owned BASIC Bank.
These cases are now awaiting formal trial proceedings.
Among these, ex-BASIC Bank chairman Sheikh Abdul Hye Bacchu has been accused in 58 of these cases.
Although allegations involve the embezzlement of Tk 3,500, the case documents have specific evidence for the misappropriation and laundering of Tk 2,265, according to the ACC.
The trials for these cases are set to be held in a special judge's court in Dhaka.
