Special Correspondent :
Farmers Bank has clamoured for Tk 300 crore emergency funds from the central bank as it is facing trouble to obtain credit at reasonable rates from money market.
Terming the bank’s appeal ‘illogical,’ banking experts have urged the central bank not to provide funds to the bank until the bank authorities recover the capital allegedly swindled b y a vested group, and restore good governance in the bank.
“The bank is seeking fund to sustain its operation, as financial irregularities along with a high level classified loan already crimping the flow of funds badly affecting the bank’s solvency,” former Bangladesh Bank (BB) Governor Dr Salehuddin Ahmed told The New Nation yesterday. “It is their ‘unreasonable demand’ and the central bank authorities should not pay heed to it.” The former BB governor further said the bank should prop up liquid funds by intensifying loan recovery drive and deposit collection.
Insiders said Framers Bank is finding hard to borrow from interbank money market at affordable rates, as lender banks lose confidence in its ‘creditworthiness’ due to its deteriorating financial health resulted from large-loan scams and soaring classified loans.
They said, depositors are withdrawing their money from that debt-staggered bank forcing it to rely on the central bank to finance their everyday business needs.
Officials of the bank did not respond to a request for comment on the issue.
“Farmers Bank had liquidity needs. The fund crisis deepened following a string of loan scandal detected earlier by the BB,” Dr Khondoker Ibrahim Khaled told The New Nation yesterday. He added, “As cash crunch gripped the bank, it turned to the central bank for funds”. The central bank should not allow the bank to borrow funds from it when the bank is heading towards bankruptcy due to irregularities and corruption. BB should extend such support to a bank that has a temporary liquidity problem,” Dr Khondoker Ibrahin Khaled told The New Nation. Farmers Bank is not supposed to get the BB support as it plunged into liquidity crisis just after it comes into operation.
Both the former central bankers also expressed scepticism whether such loans would be enough to cover the bank’s funding needs even if the central bank extends funding support to it. The Farmers Bank secured its licence along with eight other banks in June 2013.
Ruling Awami League MP Mohiuddin Khan Alamgir is Chairman of the bank.
“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.
Farmers Bank has clamoured for Tk 300 crore emergency funds from the central bank as it is facing trouble to obtain credit at reasonable rates from money market.
Terming the bank’s appeal ‘illogical,’ banking experts have urged the central bank not to provide funds to the bank until the bank authorities recover the capital allegedly swindled b y a vested group, and restore good governance in the bank.
“The bank is seeking fund to sustain its operation, as financial irregularities along with a high level classified loan already crimping the flow of funds badly affecting the bank’s solvency,” former Bangladesh Bank (BB) Governor Dr Salehuddin Ahmed told The New Nation yesterday. “It is their ‘unreasonable demand’ and the central bank authorities should not pay heed to it.” The former BB governor further said the bank should prop up liquid funds by intensifying loan recovery drive and deposit collection.
Insiders said Framers Bank is finding hard to borrow from interbank money market at affordable rates, as lender banks lose confidence in its ‘creditworthiness’ due to its deteriorating financial health resulted from large-loan scams and soaring classified loans.
They said, depositors are withdrawing their money from that debt-staggered bank forcing it to rely on the central bank to finance their everyday business needs.
Officials of the bank did not respond to a request for comment on the issue.
“Farmers Bank had liquidity needs. The fund crisis deepened following a string of loan scandal detected earlier by the BB,” Dr Khondoker Ibrahim Khaled told The New Nation yesterday. He added, “As cash crunch gripped the bank, it turned to the central bank for funds”. The central bank should not allow the bank to borrow funds from it when the bank is heading towards bankruptcy due to irregularities and corruption. BB should extend such support to a bank that has a temporary liquidity problem,” Dr Khondoker Ibrahin Khaled told The New Nation. Farmers Bank is not supposed to get the BB support as it plunged into liquidity crisis just after it comes into operation.
Both the former central bankers also expressed scepticism whether such loans would be enough to cover the bank’s funding needs even if the central bank extends funding support to it. The Farmers Bank secured its licence along with eight other banks in June 2013.
Ruling Awami League MP Mohiuddin Khan Alamgir is Chairman of the bank.
“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.
