NBR rejects Farmers Bank's request for late payment of tax

The National Board of Revenue has turned down a request from The Farmers Bank Ltd to give it extra time on grounds of its much reported liquidity crisis to deposit tax deducted at source (TDS) to the state exchequer, said an official yesterday.

The troubled bank on January 22 urged the tax authority to give it until June 15 to deposit TDS. It has also sought a similar timeframe to deposit VAT deducted at source (VDS) on the same ground.

In response, the NBR has directed the bank management to deposit all TDS immediately, saying that there is no scope of time extension as per law.  

TDS should be deposited to the state coffer within two weeks of the following month of deduction.

“We have turned down the prayer,” said a senior tax official declining to be named.

It should also be mentioned that there is provision to impose penalty for failure to deposit TDS within the stipulated time, said the NBR in a letter to The Farmers Bank.

As of January 18, the bank has deposits of Tk 4,592 crore and loans of Tk 5,098 crore, according to its application to the NBR Chairman Md Mosharraf Hossain Bhuiyan.

Due to adverse reports published in some newspapers against the bank, depositors started pulling out their funds frantically, said Md Ehsan Khasru, managing director and chief executive of Farmers Bank in the application. As a result, the deposit base shrank from Tk 5,408 crore (Oct 31, 2017) to Tk 4,592 crore, he added.

 “Hence, we are suffering from an acute liquidity crisis,” he said.

The liquidity crisis is so severe that the bank failed to keep the Bangladesh Bank's cash reserve ratio and statutory liquidity ratio requirements.

“We could not even pay back our depositors' money on time,” he said in the letter.

However, the bank's board of directors has been reshuffled and its paid-up capital is set to increase to Tk 1,500 crore from Tk 401 crore as some financial institutions have agreed to invest.

“We are also on the verge of issuing bonds amounting to Tk 500 crore. Hopefully, with all these cash injections we would be able to overcome our liquidity crisis within the shortest possible time,” Khasru said, adding that it has already deducted the TDS and VDS and is keeping them in the liability account.

The amounts will be deposited as soon as the liquidity crisis is over, he added.

The NBR official said it has informed the bank about the rejection of plea at the end of last week.