Cash-strapped Farmers Bank has decided to raise Tk 500 crore by issuing bonds at the financial market, while Bangladesh Bank on Wednesday gave the bank three months to address its liquidity crisis.
The central bank governor, Fazle Kabir, held a meeting with the members of the restructured board of the scam-hit bank at his office in Dhaka on Wednesday following the resignation of Mohiuddin Khan Alamgir as chairman of the bank.
The directors of the bank, led by newly elected chairman Mohammad Masud, assured the governor that the directors would inject money in the bank, if needed.
After the meeting, Farmers Bank director Atahar Uddin told reporters that they sought permission from the BB to issue Tk 500 crore in bonds at the market.
The central bank would give permission to issue the bonds within the next two days for tackling the private commercial bank’s liquidity crisis, he said.
He said that all the directors of the bank had given commitment to the governor that they would give financial support in order to tackle the bank’s liquidity crisis.
The central bank has given Farmers Bank three months to overcome the existing crisis, said Atahar.
Asked whether the bank’s managing director, AKM Shamim, would remain in office following the BB notice to remove him, Atahar said that Shamim would continue his job as his tenure would end in December.
Asked what measures the bank would take against board members who were involved in loan scams, Atahar said that he or the new board members did not have anything to do or that they would not take any steps in this regard.
In reply to a query about how much money the board members would inject in the bank by themselves, the director said the amount would not be disclosed to the public.
BB spokesperson Subhankar Saha said the central bank held the meeting and pressed the members of the reformed board to tackle the ongoing liquidity crisis at the bank.
The bank will carry out its regular activities while take strict measures in collecting the defaulted loans and refrain from making extra expenses, he added.
Former Sonali Bank managing director Pradip Kumar Dutta, who has recently been appointed an adviser to Farmers Bank, said the bank would issue bonds and sell those at the market and to financial institutions to create fund.
The issuance of the bonds would help Farmers Bank overcome its liquidity crisis, he added.
New chairman Mohammad Masud replaced Mohiuddin Khan Alamgir, a ruling party lawmaker, who resigned on Monday from the scam-hit bank.
Bank’s director Maruf Alam was also made vice-chairman on Monday while bank’s audit committee chairman Md Mahabubul Haque Chisty also resigned.
The changes came following a severe liquidity crisis in the newly established bank and BB’s show-cause notice regarding Shamim.
Last week, the cash-strapped bank requested the BB to give it Tk 300 crore in short-term loans as it was failing to continue its daily operations. It received Tk 96 crore from the central bank.
Farmers Bank earlier failed twice to honour a Bangladesh Telecommunications Company Ltd’s cheque for Tk 35.44
crore because of fund shortage.
The condition of Farmers Bank, one of the nine new banks licences of which were given on political consideration, has deteriorated in recent months after a huge amount of the bank’s loans, which were given in violation of rules, became defaulted.
After only four years of operation, the defaulted loans at the bank stood at Tk 377.68 crore as of September 30, rising by
Tk 100 crore from a year earlier.
BB officials said that the huge amount of defaulted loans had resulted in a liquidity crisis at the bank and erosion of trust of its depositors.
The bank cannot draw deposits despite offering interest rates over 12 per cent, against 4-8 per cent offered by other banks.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Banking