BASIC Bank will operate as a scheduled bank from now: Bangladesh Bank

BASIC Bank will operate as a scheduled bank from now: Bangladesh Bank

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State-owned BASIC Bank will operate as a scheduled bank from now on rather than a specialised one, says Bangladesh Bank.The decision was taken at a Board meeting of the central bank recently.“The board members have been instructed to describe BASIC Bank as a commercial bank. And all the banks have been instructed accordingly,” said Bangladesh Bank’s Executive Director M Mahfuzur Rahman.According to its Articles of Association, BASIC bank has to disburse 50 percent of its funds available for borrowing to small and medium enterprises.The change means that it does not have to comply with that clause any more.Scheduled banks, however, need a prior approval or a no-objection certificate (NOC) from the central bank to appoint directors, which is not the case for specialised banks.But, the finance ministry recently appointed directors for the bank without consulting with the Bangladesh Bank.The issue of BASIC Bank being a specialised or scheduled bank surfaced in that context.The central bank had written to the finance ministry expressing its unhappiness over the matter.It said that BASIC, which was formed under the Bank Company Act, is a commercial entity. So, an NOC from the Bangladesh Bank is a mandatory legal requirement.
After which, the ministry obtained an NOC by the central bank over the appointments.BASIC Bank, which started operating in 1989, was initially a joint venture of the BCC Foundation holding 70 percent shares and the rest of the shares being held by Bangladesh government.In 1992, the government took over 100 percent ownership after the BCC Foundation became non-functional.Last year, several top-rung BASIC officials including the managing director were removed by central bank after its audit detected irregularities in the disbursement of loans amounting to Tk 45 billion over five years.Most of the loans remained unpaid because many borrowers were not traceable.The bank’s Chairman Sheikh Abdul Hye Bacchu stepped down following the loan scam.The irregularities have landed BASIC Bank in an acute crisis prompting several international banks to reject letters of credit (LC) opened by it.According to the Bangladesh Bank, the deficit of the bank’s capital currently stands at Tk 16.76 billion and half of its 68 branches are running up losses.

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