The finance ministry in a gazette notification said the decision was taken to ease depositors' plight and create a congenial atmosphere to recover its outstanding loans.

The total deposit of Oriental Bank was Tk 2,220 crore in December last year, of which public deposit was Tk 1,300 crore, government deposit Tk 570 crore, and other banks' deposit Tk 350 crore.

The bank's accumulated loss was Tk 490 crore in June last year before being taken off by the Bangladesh Bank (BB) and its overall capital shortfall was Tk 1,733 crore. At the same time, its classified loan was about 64 percent of the total loan.

The finance ministry gazette said during the moratorium period a depositor will be allowed to withdraw highest Tk 10,000 per month while the bank can take new deposits. There will also be no restriction on withdrawing money from these new deposits, the gazette said.

The government made the move--first of its kind against any local commercial bank--at the directives of Bangladesh Bank.

BB Deputy Governor Nazrul Huda said some activities of the bank have been suspended for six months. "This is not closing down a bank," he said.

"We had two options for Oriental Bank considering its present situation--either liquidation or reconstitution," Huda said, adding, "We have chosen the second one in the interests of the depositors."

The government slapped the moratorium for preparations of the reconstitution process. "I think the bank can be reconstituted within this period," he said.

"We will bring reforms in the bank during this six months for resuming all activities," Asaduzzaman Khan, Oriental Bank administrator appointed by the central bank, told The Daily Star yesterday after receiving the government decision.

"We will work hard to make it a good financial institution in the next six months," he added.

He said all the branches of the bank will remain open and their officials will get salaries as usual during the period.

"We will be able to conduct seven types of transaction during this period," he said, referring to the government decision.

The Oriental Bank is allowed to operate transactions of letter of credits (LC) against import and export opened before beginning of the moratorium period.

Moreover, all import related transactions by the exporters are allowed in the bank, the gazette said, adding that remittance withdrawal facilities will remain open.

The utility service providers will be able to withdraw their money deposited in Oriental Bank as utility bills and at the same time exporters will be able to withdraw money from export earnings.

On issuing demand draft (DD) and pay order, the gazette said the bank is allowed to issue DD and pay order only after 100 percent cash deposit of the amount.

It said Bangladesh Bank will consider resuming any other activity of Oriental Bank during this moratorium period for the interest of both the depositors and the bank.

The Bangladesh Bank will prepare necessary schemes for Oriental Bank as per Clause 77(4) of the Bank Company Act, 1991.

According to the clause, the central bank will be able to reconstitute Oriental Bank or merge it with other banks for the interest of the depositors and banking sector. There can be arrangements for increasing the bank's capital through issuing shares by private placement.

Meanwhile, nobody can challenge the moratorium over Oriental Bank in any court and nobody can file cases for recovery of their loans by Oriental Bank during the six-month period.

However, the bank can file civil and criminal cases to recover its outstanding loans.

Asaduzzaman Khan said the BB took off the bank amid an acute liquidity crisis. "We have found a big hole in the bank after taking over the charge. It needs huge capital injection in the bank to overcome the crisis," he said.

Bangladesh Bank dissolved the board of directors of the problem-ridden Oriental Bank in June last year and appointed an administrator from the central bank.

Later, the central bank investigated the bank's scam and found that its majority shareholder Obaidul Karim, former managing director Chowdhury Koyes Sami, and a number of officials were involved in misappropriating about Tk 595 crore.

Following the central bank's direction, the Oriental Bank management yesterday filed criminal cases against 24 people found guilty in investigation.

Sources said apart from these 24 people, a number of politically influential persons, including BNP leader and former lawmaker Mosaddek Ali Falu, embezzled a huge amount of money from the bank during the immediate past government's rule.

There are records of shutting down one foreign bank and two local financial institutions.

OWNERSHIP CHANGING AND LOSSES MOUNTING
When the bank was set up in 1987, a Jeddah-based Al-Baraka Investment and Development Company and local Amanullah Group -- former owner of Pepsi franchise, had major stakes in it with 34.67 and 40.46 per cent and then it was called Al-Baraka Bank (later renamed Oriental Bank). From the very beginning the bank gave loans to influential people violating regulations and these loans were never recovered. Consequently, it has been always on a losing streak.

One of the bank's big defaulters Abul Khair Litu and his Bengal Group took a huge loan. The bank also gave loans against fictitious names and organisations. The bank filed criminal cases against Litu and obtained arrest warrant. Litu escaped arrest by an ad interim bail.

In January 2002, Al-Baraka sold its shares to a number of Hong Kong-based investors while in December 2001 Amanullah Group also sold its shares to five local companies. It was learnt that Litu purchased those shares using fictitious names and established his control over the bank's management. Consequently, the bank's condition continued to deteriorate.

In 2005, the bank's ownership once again changed hands and Orion Group and its sister organisations bought 83 per cent of the shares. Orion Group's Chairman Obaidul Karim told Dainik Prothom Alo that they have now 42 per cent of those shares while the other 41 per cent belonged to foreign companies. He also said he bought the shares for Tk 34 crore from Litu.

But the bank's situation did not improve this time either and continued to turn from bad to worse day by day. There are allegations that loans have been taken in real and fictitious names violating bank rules. Karim however denied these allegations while talking to Prothom Alo.

Following the labelling of 'problem bank', the bank had an observer appointed by BB who remains present in the bank's board meetings. Over the last few years a number of special Memorandum of Understanding (MoU) were signed between BB and Oriental but things did not improve.

A BB source said the BB-appointed observer used to be present in the bank's board meeting but the bank's influential directors used to get loans from the branches and those loan proposals did not require the board's approval. The bank's higher management also connived with the corrupt practice of the directors, sources said.