BASIC Bank MD fired

Kazi Faqurul Islam

The central bank yesterday fired BASIC Bank Managing Director Kazi Faqurul Islam for presiding over a period of serious irregularities at the state-run scheduled bank.
The move comes after a standing committee headed by Nazneen Sultana, deputy governor of Bangladesh Bank, found him to be culpable of seven counts of offence, including lack of sound management, failure to safeguard depositors' interests and loan irregularities.
The verdict, which took effect yesterday, also forbids Islam from seeking employment in another bank over the next two years.
“All offences against you have been proved to be correct. As an MD, you have completely failed in your duty to look after the bank,” the BB said in the letter to Islam.
BB investigations found that the bank's Gulshan branch extended a fresh loan of Tk 50 crore to a default borrower, Delta System Ltd, which is prohibited by the Bank Company Act, said the letter.
Upon learning of the transgression, BB straightaway sent instructions to classify the loan, which BASIC Bank failed to act on. “That was a complete disrespect to the central bank directive,” said the letter.
Not only that, a further Tk 30 crore loan was extended to the same client, according to the letter.
To show the financial health of the bank to be better than it is, BASIC Bank showed a host of classified loans to be regular ones, which is again a grave offence.
The state-run bank also did not monitor any of the loans it gave out, putting the institution in serious jeopardy. “It showed gross negligence and a lack of sound judgement on your part,” the letter said.
The bank also promoted its two general managers Ruhul Alam and Md Selim to deputy managing director by violating rules.
Copies of the letter were forwarded to BASIC Bank's chairman and the finance ministry's banking division as well.
One of the best-run banks until 2009, BASIC Bank has been mired in financial irregularities in recent years.
Islam, who assumed the position of MD in 2010, failed to take actions after a host of financial irregularities involving around Tk 3,500 crore had been detected at the bank between 2012 and 2013.
The BB investigators found 12 counts of irregularities by BASIC Bank in giving out loans, which include no verification of customer's creditworthiness, absence of KYC procedures, and extending loans to defaulters.
The majority of the anomalies were detected in the bank's Dilkusha, Shantinagar and Gulshan branches in Dhaka.
In a bid to check the irregularities, the BB had signed a memorandum of understanding with BASIC Bank in July last year, where the bank pledged to execute a number of actions by December 2013.
The agreement obliged BASIC Bank 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.
BB stipulated that the bank raises its capital adequacy ratio (CAR) to 11 percent by the end of 2013. The CAR on December 31 last year stood at 4.5 percent.
It was also supposed to make up the capital shortfall of Tk 128.21 crore in 2013, but in reality, the capital deficit widened to Tk 647.38 crore by the end of December.
The state-owned scheduled bank also fell short in cash recovery last year: it was supposed to be a minimum of Tk 212 crore but BASIC Bank managed Tk 142.82 crore.
The troubled bank's non-performing loan ratio by the end of 2013 needed to be 5 percent, but it stood at 11.72 percent.
Another target was to transform the loss-making branches into profitable ones during the course of the year, which, again, it failed to. Of the total of 68 branches, 33 remain loss-making.
Meanwhile, the Anti-Corruption Commission yesterday served notice on BASIC Bank's former deputy managing director Abdul Monayem Khan and his wife and general manager Md Zainul Abedin Chowdhury, his wife and son.
Both officials were suspended on April 15 along with other top officials for financial irregularities.