BASIC makes headway in loan recovery

BASIC Bank's new management managed to recover cash amounting to Tk 1,204 crore in the last three years but its overall financial condition continues to remain weak. 

As of August, half of the bank's total loans of Tk 14,090 crore were ineffective against which it cannot make any income, according to a report it placed on Sunday before a parliamentary committee.

Rather, the state-owned bank's financial indicators are in the danger zone for the bad loans.

Between 2010 and 2014, unbridled irregularities and corruption had an extremely negative impact on the overall activities of the bank; a grave deterioration of different financial indicators was visible.

Since the bank started its journey in 1989, it remained a profitable organisation until the first half of 2009, when Sheikh Abdul Hye Bacchu took over the reins and the decline started.

The report presented a comparative picture and said in 2009 the bank's classified loans were only 4.83 percent of its total outstanding loans, which spiralled to 67.91 percent at the end of 2014.

Until 2009 the bank did not have any provision or capital deficit.

But in 2014 the provisioning shortfall was Tk 3,866 crore and capital deficit Tk 3,516 crore.

Despite reports of irregularities, Bacchu was offered a second terms as chairman in 2012.

Finally in June 2014, as reports of rampant irregularities became inescapable, Bachchu was given the option to resign instead of being fired by the government.

In July 2014 the new board took over, led by BASIC's former managing director Alauddin A Majid as the chairman.

In the three years since the new management took over, Tk 4,008 crore worth of loans were also rescheduled, the report said.  As a result, at the end of August, the amount of classified loans was 51 percent, which is expected to come down to 40 percent by the end of the year.

In last three years, BASIC disbursed fresh loans of Tk 2,152 crore to take the tally of outstanding loans at the end of August to Tk 14,090 crore.

The bank logged in losses of up to Tk 122 crore, but as of August this year it made operating profit of Tk 32.62 crore, which is expected to hit Tk 60 crore at the end of the year.

In the last three years the government gave BASIC Tk 3,390 crore to meet its capital deficit but still it has a deficit of Tk 2,210 crore. In the report BASIC said it did not give out the money received from the government as loan.

Of the amount, the bank invested Tk 2,799 crore in government treasury bonds and Tk 929 crore in the money market. If the government money is deducted, the bank's capital deficit stands at Tk 5,600 crore, which has accumulated between 2009 and 2014 thanks to bad loans.

A high official of BASIC told The Daily Star that they are still struggling to realise the bad loans.

After the new management took charge they found that several traceless firms were given loans by their predecessors.  They were finally able to trace 50 firms but seven borrowers still remain to be identified although three years have passed.

In the report, BASIC gave the committee a list of 628 defaulting firms that owed Tk 6,538 crore to the bank as of June 30. BASIC told the committee that in order to realise the loans, it filed cases with Artha Rin Adalat.

But many of the firms in question have filed writ petitions with the High Court. The number of on-trial cases at the end of last month stood at 326. Together, the firms owed Tk 4,535 crore to the bank. BASIC MD Khondoker Md Iqbal told the parliamentary committee that the former chairman of the bank made a huge mess while giving out the loans.

The MD told the committee meeting that while granting loans the former chairman did not go by any rules of the central bank, the banking division and even the bank's.