The central bank and the finance ministry have finally stepped in to rescue the troubled BASIC Bank, though they are yet to initiate any action against the instigator behind the irregularities, the bank's chairman Sheikh Abdul Hye Bacchu.
As part of the rescue plan, Bangladesh Bank yesterday suspended fresh loan activities and disbursement of already sanctioned loans of the branches where most of the indiscretions took place – Gulshan, Dilkusha and Shantinagar.
BB investigations detected massive financial irregularities involving around Tk 4,500 crore of loans in the three branches between 2009 and 2013.
The move comes just a day after the regulator fired Kazi Faqurul Islam from the post of managing director on Sunday.
“We are happy to see that the government has finally understood that the bank has been damaged seriously,” said a central bank senior official wishing not to be named.
“Still, the main accused [Chairman Sheikh Abdul Hye Bacchu] remains untouched,” he added.
Established in 1989, BASIC was one of the best-run government banks until 2009, when the government appointed Bacchu as the chairman.
Spearheaded by Bacchu, the bank indulged in gross irregularities in giving out loans which include no verification of customer's creditworthiness, absence of KYC (Know Your Customer) procedures and granting loans to defaulters.
BB investigations found that the bank's chairman has arbitrarily approved many loans despite the branches concerned giving out negative notes on the clients.
For instance, the bank's Gulshan branch showed a Tk 60 crore classified loan of Ocean and Design (BD) Ltd to be a regular one, to show BASIC's financial health to be better than it is.
The branch also gave out $4.25 lakh export value to one of its clients; the amount was never repatriated to the bank, and it never took any action.
Another irregularity detected was that the branch created around Tk 10 crore forced loan against import bills of three clients. The loans have already become classified.
In a bid to check the irregularities, BB had signed a memorandum of understanding with the bank in July last year, where it pledged to execute a number of actions to bring back normalcy by December 2013.
The state-run scheduled bank, however, failed to comply with the various conditions of the MoU.
The agreement obliged BASIC to limit its single borrower exposure to 15 percent of the bank's total capital, but it overshot the ceiling for 61 of its clients, giving out Tk 2,111 crore more in loans than it should be.
BB also appointed an observer in the bank, who submitted many negative reports to the central bank about the continued irregularities.