Board gives Tk 17cr to ease cash crunch

The newly reconstituted board of Farmers Bank has injected Tk 17 crore into the bank to help the trouble-hit lender deal with the ongoing cash crunch.  

The directors will contribute up to Tk 100 crore gradually from January as per the central bank's instruction. The bank will also raise funds by appointing four new directors.

Farmers Bank Chairman Mohammad Masud shared the development at a meeting with the reporters at a hotel in Dhaka yesterday in presence of Directors Azmat Rahman and Sayeed Ahmed.

"The board is working to restore the depositors' confidence and recover money from the defaulters," Masud said.

The board has identified two major problems confronting the bank at the moment: erosion of depositors' confidence and liquidity crisis. At present, the bank has one lakh depositors, of which about 35 are institutional.

"Many institutional depositors are forcing the bank to return their money. This is happening due to lack of confidence. So, we are trying to convince them not to withdraw money," Masud said.

Savers withdrew Tk 1,100 crore in the last 15 days putting the bank into cash crisis. Total deposit stands at Tk 5,000 crore against outstanding loan of Tk 5,200 crore, according to the bank.

"The board has decided to keep lending activities on hold until it gets out of the liquidity crisis," said Masud.

The four-year old bank has already received approval from the central bank to raise Tk 500 crore by issuing bonds.

"We will knock institutional investors so they invest into the bond. The central bank has assured us that it will pursue investors," said the chairman.

Farmers Bank has taken various measures to cut costs and restore confidence of its employees.

The bank held an executive committee meeting recently where 13 directors were present, the biggest turnout of board members.

"We are trying to take decisions through discussions in the board and now every director can give their opinion," said Masud.

"Earlier, we could not give any opinion in case of approving loans despite being a board member. In all cases we used to approve post facto proposals in the board during the tenure of Muhiuddin Khan Alamgir."

Recently, the bank organised a managers' conference to hear from them on how to get the bank out of the current crisis. In the past, it had never sat with the managers to listen to their views about the lender's business and ambition.

Farmers Bank has also moved to carry out a special internal audit to identify all the misdeeds that took place in the bank. It will also relocate some branches which have been rented at high prices, said Masud.

Last month, former chairman of Farmers Bank Muhiuddin Khan Alamgir resigned from the board following the central bank's instruction. He was replaced by director Masud.