Farmers Bank bailout must entail action against board

Published: 00:05, Feb 09,2018

 
 

THE plan that the government is reported to have almost chalked up for a bailout fund of Tk 11 billion for Farmers Bank through the state-owned Investment Corporation of Bangladesh and three state-run commercial banks is worrying. This is so because such bailout for the bank — which is facing liquidity crisis because of aggressive banking, loan irregularities, gross mismanagement and undue interference of the previous board — would mean nothing but legitimising what has brought down the bank. The bailout as planned would also mean encouraging all the factors that have made the bank moribund and, thus, leaving chances for their recurrence, especially when almost no action has been taken against the previous board of the bank, which was licensed in 2013 on political considerations. The bank board was reconstituted, the government unburdened, in November 2017, the bank of its managing director; the board’s the then chairman Muhiuddin Khan Alamgir, also a former home minister, has recently stepped down keeping to what the Bangladesh Bank, which has provided Tk 960 million for Farmers Bank through repo, wanted. But for these changes, no action, legal or procedural, has been taken against the board responsible for the bank’s plight.
In such a situation, the implementation of the proposal for a bailout fund — with the Investment Corporation of Bangladesh giving out Tk 4.5 billion and Sonali, Janata and Agrani Bank giving out the rest of Tk 11 billion — for Farmers Bank would encourage regularities that have jeopardised the bank and, thus, the banking sector as a whole. Farmers Bank, as of August 2017, had a total deposit amount of Tk 51.7 billion while its loan portfolio stood at Tk 48.54 billion. The bank, as of September 2017, had Tk 3.77 billion in defaulted loans and it could recover only Tk 70 million in March–June 2017. The plight was clearly forthcoming as the central bank in 2015 found Farmers Bank responsible for the disbursement of Tk 4 billion in loans without following due procedures. The situation is so bad that even the finance minister Abul Ma’al Abdul Muhith used the word ‘horrible’ to describe it although he is reported to have said that the government cannot let a bank go bankrupt. The bank may need money to return what the depositors, other than who have brought down the bank, had in the bank’s keeping. But the arrangement for money for the bank to replay the depositors does not mean that there should be no action against the people who are responsible for the plight. The government should pressure the bank to recover the loans in default.
With the state of the banking sector so remaining, the government is reported to have been all set to license three more banks, which might only add to the jeopardy. The government should, therefore, take a serious look into the banking sector before licensing more banks. The government, under the circumstances, must also take legal action against the people responsible for the state of Farmers Bank at hand before injection of any fund. It must also keep watch that irregularities that the bank was mired in do not take place in future.

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