Deposits at BASIC Bank declined by Tk 997.56 crore in six months of this year as the depositors gave the state-owned bank the cold shoulder after Bangladesh Bank had detected huge irregularities at the bank, according to a finance ministry report.
Experts and economists told New Age on Friday that the depositors lost their confidence over the bank after the central bank had unearthed that BASIC Bank disbursed more than Tk 4,500 crore in loans in the last few years, violating rules and regulations.
The ministry report, submitted to the parliamentary standing committee on public undertakings on Thursday, showed that deposits at BASIC Bank dropped to Tk 12,451.78 crore as of June 30, 2014 from Tk 13,449.34 crore as of December 31, 2013.
Deposits at the bank had maintained an upward trend between 2009 and 2013, but the trend altered in the first half of this year, according to the report.
Deposits at the bank stood at Tk 3,450.17 crore as of December 31, 2009, at Tk 4,925.96 crore as of December 31, 2010, at Tk 6,265.07 crore as of December 31, 2011 and at Tk 8,769.32 crore as of December 31, 2012.
Former BB governor Salehuddin Ahmed told New Age that deposits at BASIC Bank decreased as public confidence over the bank declined due to the loan scams.
He said, ‘The officials of BASIC Bank did not give attention to deposit collection in recent years as they were busy to siphon off money through scams.’
The loan scams at BASIC Bank has put a negative impact on the country’s banking industry, he said.
Salehuddin feared that the reputed banks might also face the slower growth in deposit collection due to an image crisis of the country’s banking sector.
Against the backdrop, the overall macroeconomic growth will be hampered as the banks usually play a significant role in mobilising assets by collecting deposits from people, he added.
Former BB deputy governor Khondker Ibrahim Khaled told New Age that deposits at BASIC Bank declined due to massive irregularities held at the bank in recent years.
The depositors have already been informed about the bank through reading media reports and the scam incidents have discouraged them to deposit their money with the bank, he said.
He, however, said that the declining trend in deposit collection was not the vital factor for the bank, irregularities and corruption in sanctioning loans was the major problem.
Due to the irregularities, defaulted loans at the bank increased heavily in recent years, he said.
The ministry report showed that the amount of disbursed loans at BASIC Bank had increased by Tk 433.40 crore to Tk 11,376.24 crore as of June 30, 2014 from Tk 10,942.84 crore as of December 31, 2013.
A BB official told New Age that the credit growth at the bank had increased significantly not only at the first half of this year but also in the last five years.
The board of directors along with the senior management of the bank abnormally sanctioned a large amount of loans during the last few years, violating regulations, he said.
The amount of disbursed loans at the bank stood at Tk 2,926.15 crore as of December 31, 2009, at Tk 4,634.15 crore as of December 31, 2010, at Tk 5,688.48 crore as of December 31, 2011 and at Tk 8,595.58 crore as of December 31, 2012.
BB inspection teams found that the Shantinagar, Dilkusha and Gulshan branches of the state-owned bank gave around Tk 4,000 crore in loans between December 2009 and 2013, mostly by violating banking norms and rules.
The three branches of BASIC Bank gave significant amount of loans to nonexistent companies and approved loans instantly after the clients had opened accounts, according to the BB inspection reports.
Moreover, the bank’s board sanctioned loans even before the branch sent the loan proposal to its headquarters.
Of the amount, Tk 1,800 crore was given by the Gulshan branch, and most of the loans were issued without proper scrutiny.
The BB inspection reports showed that the amounts of loan disbursed by Shantinagar and Dilkusha branches were Tk 1,524 crore and Tk 923.21 crore respectively between 2011 and 2012.
-With New Age input
