BASIC Bank losing battle with default loans

Welltex Group, the top defaulter of BASIC Bank who was allowed to reschedule loans under a special arrangement by the Bangladesh Bank, has once again turned a defaulter from September this year.

As of September, the garment manufacturer, who was given loans amounting to Tk 129 crore during the tenure of controversial former chairman Sheikh Abdul Hye Bacchu by way of irregularities, has Tk 169 crore outstanding with the state bank.

The business group is owned by Majedul Haque Chisty, brother of Md Mahabubul Haque Chisty who recently had to step down from the board of Farmers Bank over his alleged involvement in financial scams.

Welltex Group was given a fresh start by the succeeding board after Bacchu's but it again defaulted.

With the view to bringing down the embattled bank's default rate, the board went for wholesale loan rescheduling, one of the beneficiaries of which was, unfortunately, Welltex Group.

More than 100 companies that were given loans of Tk 10 crore and above during Bacchu's reign of irregularity were also given another chance in 2015, many of whose loans were rescheduled without taking the required down payment.

As of September, a chunk of those loans have turned bad again.

One such company is Crystal Steel and Ship Breaking Ltd, which was allowed to reschedule loans of Tk 113 crore. The company just furnished Tk 8.24 crore at the time of rescheduling, after which it did not make any instalment payment.

Current Jatiya Party lawmaker Mahajabeen Murshed's IG Navigation Ltd also became a defaulter in September after it failed to make payments on its rescheduled loan of Tk 89 crore.

"Such companies were rescheduled so that the bank could recover at least a minimum amount from them in the form of down payment," said Alauddin A Majid, chairman of BASIC Bank.

The bank recovered about Tk 1,200 crore in the process, he said.

Between September 2015 and this year, BASIC Bank rescheduled a total of Tk 3,500 crore. It also wrote off loans amounting to Tk 443 crore this year.

The huge rescheduling and write-offs though had the opposite effect: the bank's default loan ratio went up.

At the end of September, BASIC's default loan ratio stood at 55.16 percent, up from 44.25 percent in September 2015 and 52.94 percent in September 2016, according to data from the BB.

The bank's capital shortfall stood at Tk 2,523 crore as of September this year and provisioning shortfall Tk 3,421 crore.

Of the 65 branches of BASIC, 25 are running losses.