Special Correspondent :
Bangladesh Bank (BB) has rejected the Farmers Bank’s bid for Tk 300 crore emergency fund, asking it to raise the fund intensifying loan recovery drive.
Senior BB officials recently held a closed-door meeting with the Framers Bank officials where they conveyed that the central bank does not want to extend the fund since the bank’s top management is not stepping down.
BB Governor Dr Fazle Kabir and Farmers Bank Chairman MK Alamgir were present, among others, at the meeting held at the BB headquarters in the capital on Tuesday.
The trouble hit Framers Bank earlier sought the fund to cover up its liquidity shortage.
“The central bank decided not to allow the bank to get the funding support considering its current state of financial health and mismanagement by top officials,” according to two BB officials familiar with the meeting.
He said BB high-ups in the meting weigh their options to provide funds to the troubled bank, but did not find any alternative.
“The central bank takes a rigid stance over the issue as the management of the bank failed to implement prudential guidelines in operating the bank as well as implement good corporate governance. Even the bank engaged legal battle with the BB,” said the BB official.
Another BB official told The New Nation yesterday that central bank authorities denied to provide the funds and asked its chairman to step down from his post for his failure to administering the bank.
“One of the BB top officials asked him to resign his post saying BB will not allow the bank to get the emergency fund under the current management. MK Alamgir took a rigid stance and declined to resign.
“The bank has already become insolvent … It requires bailout fund to maintain its operation. But BB would not inject the fund before a major management shake-up in the bank,” said the BB official.
Earlier the bank has twice failed to honour a cheque worth Tk 35.44 crore placed by Bangladesh Telecommunications Company Ltd (BTCL) due to fund shortage.
“BB is working to dissolve the board of directors of the bank and thinking to appoint an administrator there for smooth running of the bank. It may consider to provide the emergency fund after abolishing the incumbent board,” said the BB official.
Farmers Bank recently sought Tk 300 crore emergency funds from the central bank in the wake of growing liquidity crisis resulted from swindling of a large chunk of liquid fund by a vested quarter under the cover of junk loans and piling up classified loans.
BB last month in a report to the Parliamentary Standing Committee on the finance ministry said the bank does not have the capacity to pay back funds to depositors and other banks.
Prior to this, BB found Tk 400 crore loan irregularities at the bank while conducting inspections.
The Farmers Bank secured its licence along with eight other banks in June 2013.
“Farmers Bank has loosened rules of disbursing loans and its internal control system soon after 2013 and sanctioned loans to organisations that actually did not exist. It also gave loans to its directors and directors of other banks violating rules.
Even the bank was taking loans with high interest rates from depositors and other banks while it does not have the capacity to repay putting a ‘systematic risk’ for Bangladesh’s entire financial sector,” says a Bank and Financial Institutions Division’s (BFID) report.
It says the Farmers Bank has been experiencing liquidity crisis for a year and it has deepened to such a level that the bank is failing repeatedly to fulfil cash reserve requirement or CRR at the BB.
Twenty-eight of the 54 branches of The Farmers Bank are operating on losses.
