Bangladesh Bank has directed scam-hit Farmers Bank to remove its managing director AKM Shamim over unrelenting disbursement of loans despite a liquidity crisis in the bank.
The central bank in a letter issued to the bank board on Sunday night asked the board to explain, according to article 46 of the bank act, why Shamim would not be removed in seven days, said BB officials.
They said that the BB asked for Shamim’s removal on two grounds — one is the bank management’s failure in managing liquidity and the other is issuance of large sums of loans violating the central bank’s order of not issuing further loans because of its ongoing liquidity crisis.
The private bank, which was set up only four years ago, has been facing an acute liquidity crisis for the last few months because of its rampant disbursement of loans, rising defaulted loans and failure to draw depositors.
Farmers Bank chairman Mohiuddin Khan Alamgir, who is also a lawmaker of ruling Awami League, could not be reached over phone for comments despite repeated attempts on Monday.
Shamim also did not respond to repeated calls.
BB spokesperson Subhankar Saha said that he did not have any knowledge regarding the matter.
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.
The central bank in January, 2016, appointed observer to the bank after finding violation of banking rules in sanctioning and disbursing loans and hiding defaulted loans amounting to around Tk 400 crore.
According to central bank inspection reports, Farmers Bank, which started banking operation on June 3, 2013, disbursed fresh loans in favour of defaulted clients collecting fake credit information bureau reports and took over a number of loans from other banks breaching the banking rules.
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 the trust of depositors.
The bank cannot draw deposits despite offering interest rates over 12 per cent, against 4-8 per cent offered by other banks.
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