The government is going to provide BASIC Bank with fresh fund again to keep it alive, finance minister AMA Muhith said in Dhaka on Tuesday.
He, however, did not specify how much fund would be given to the cash-strapped state-owned bank.
The finance minister was talking to reporters after participating a meeting of the national climate fund at the secretariat.
On December 20, the Bank and Financial Institutions Division sought approval from Muhith to issue interest-free bonds worth Tk 2,600 crore for recapitalising BASIC Bank.
In August this year, scam-ridden BASIC Bank requested the government to give it bailout fund for the third time since 2014.
Muhith said it was not possible for the government to provide the fund demanded by BASIC.
He said the Finance Division would determine how much fund could be given to the bank examining the proposal from the BFID.
In 2014, BASIC Bank was given Tk 1,100 crore and in January this year it was given Tk 1,200 crore from the government exchequer despite opposition from economists.
BASIC Bank’s bankruptcy stemmed from massive shoddy loans extended by its board of directors led by former chairman Abdul Hye Bacchu between 2009 and 2014.
The government took no legal action against Bacchu though Bangladesh Bank as well as internal probes found incriminating evidence of his complicity in extending hefty loans to fictitious borrowers.
The BFID official said Bangladesh Bank gave positive opinion on issuance of bonds in favour of BASIC Bank.
According to the proposal, the official said the Finance Division would issue three types of bonds styled ‘the BASIC Bank Re-capitalisation Bond’.
Of them, proposed two bonds worth Tk 800 crore each would be matured in 10 years and 15 years. The other proposed bond worth Tk 1,000 crore would be matured in 20 years.
The official said BASIC Bank would issue 26 counter bonds worth Tk 100 crore each against the three types of bonds for the investors.
Khondoker Md Iqbal, who was appointed as BASIC Bank managing director in October 2014, said the bank required recapitalisation fund badly to keep provision against its bad loans.
In December 2015, BASIC Bank’s bad loans stood at Tk 6,581.15 crore from Tk 8,105 crore in December 2014, he said.
Iqbal said BASIC Bank was facing problems to maintain business with foreign banks due its capital shortfall.
Economists including former interim government’s finance adviser AB Mirza Azizul Islam and Policy Research Institute executive director Ahsan H Mansur were among others opposing the idea of providing bailout funds to BASIC Bank.
They urged the government to stop injecting fresh funds into scam-ridden banks by way of cash or bonds. The government should compel BASIC Bank to recover all its shady loans, the economists argued.
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