Home ›› 14 Feb 2021 ›› World Biz
The Bangladesh Bank has recommended recovery of Tk 2,162 crore from the top 20 defaulters of Basic Bank through legal means or compromise. Besides, the Basic Bank was asked to identify the reasons for the increase in classified loans of Tk 7,895 crore. Bb asked the Basic Bank to prepare an action plan for the recovery of these loans. Besides, the BB has recommended 29 points including ensuring swift disciplinary action against those responsible for financial irregularities.
These recommendations are made to stop corruption in Basic Bank and improve the overall situation. Recently it has been sent in the form of a report to the Financial Institutions Division of the Ministry of Finance. This information has been found in the relevant sources.
The BB has prepared an inspection report on the financial activities of Basic Bank till 2019. It is made by analysing all kinds of indicators on 72 branches of the bank. On the basis of which the central bank has made these recommendations. It is mentioned that as of 2019, the loan in Basic Bank was Tk 13,731 crore. Of this, the defaulted loan is Tk 7,576 crore. For various reasons, the bank's loss stood at Tk 328 crore.
When asked, Additional Secretary (Commercial Bank) of the Financial Institutions Department Arjit Chowdhury told Business Post , "We will follow up the inspection report of the Central Bank." The Financial Institutions Division holds quarterly meetings with state-owned commercial and specialized banks. Steps will be taken to discuss the report there. He added that after reporting such inspections, Bangladesh Bank held a meeting with the concerned banks on the issues. There are various directions were provided to Basic Bank management.
In this context, the former governor of Bangladesh Bank. Saleh Uddin Ahmed told Business Post that the central bank does not have to give only inspection reports. In the light of this, strong steps have to be taken. If anyone on the board is involved in these irregularities, action must be taken against them. Otherwise, no remedy can be found with these reports, he said.
Other recommendations in the report said that the issue of financial irregularities within the bank should be strengthened from the meeting of the board of directors. In case of cancellation of defaulted loans, compliance with the instructions of the Bangladesh Bank and recovery of money from the defaulters should be sent to the Central Bank at quarterly intervals.
Besides, strategies need to be worked out for the implementation of short, medium and long term plans already taken to achieve the capacity of Basic Bank. It also called for action plan, rescheduling of loans and adherence to central bank guidelines to ensure balance of liabilities and assets.
The report’s recommendations are that small and medium entrepreneurs should be given loans to reduce risk without distributing loans to a few customers. Collections from small and medium entrepreneurs should be given more importance as opposed to large deposits from single individuals or organizations. The bank, which is kept in a non-financial institution, was asked to take effective steps to recover the money.
It further said that in order to expedite the disposal of bank cases, it is necessary to appoint lawyers, review the central bank's guidelines to reduce overall risk, increase credit distribution among women entrepreneurs and review the relevant policies every year for proper risk management. The recommendations of the internal and external audit and the inspection report of the central bank will have to be reviewed at the board meeting. Necessary steps need to be taken to understand Zaman-Basic Bank Tower and implement Core Banking Solution (ICCD).
Earlier, Basic Bank had committed corruption worth Tk 3,065 crore. This huge amount of money was taken out in the name of loan. Of this, Tk 429 crore was lent against fake collateral, Tk 16 crore was taken out in the name of non-existent institutions, Tk 735 crore was taken in the name of loans with unsecured and low collateral.
Besides, ignoring the committee's ban, a loan of Tk 21 crore was given and a loan of Tk 56 crore was given in the legal sector. There is also an audit report.
Bangladesh Bank has again inspected the activities of Basic Bank. After that various irregularities were highlighted in the inspection report. There is talk of other things besides recommendations. It is noteworthy that although there is an instruction to adopt a policy to reduce the risk, it is not effective. In most cases there is a lack of goodwill to follow an effective risk management approach. It further said that in 2003, Bangladesh Bank issued Core Risk Management Guidelines. Then an era has passed. But the rating is still fair or marginal when it comes to implementation. Although instructions were given in the previous inspection report, the situation has not improved much.
In the case of internal audit, it is said that no service standard has been formulated to ensure accountability of work. Besides, there is no internal audit system in all the branches of the bank. The bank inspection report does not provide reasonable and up-to-date answers on irregularities and corruption. As well as the compliance reply is sent through the repetition of the same reply. Weaknesses in the bank's audit, monitoring and compliance divisions were also found.
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