Proposed Bengal, Citizens banks fail to raise Tk 500cr paid up capital

Staff Correspondent | Published at 12:00am on December 06, 2019

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A file photo shows the Bangladesh Bank headquarters in Dhaka. Bangladesh Bank has granted two more months to the proposed Bengal Commercial Bank and Citizens Bank for fulfilling regulatory requirements for getting licences as the entities failed to do so even after seven months of getting primary approval.— New Age photo

Bangladesh Bank has granted two more months to the proposed Bengal Commercial Bank and Citizens Bank for fulfilling regulatory requirements for getting licences as the entities failed to do so even after seven months of getting primary approval.

BB officials said that the proposed banks failed to form their paid up capital — Tk 500 crore each within December 4 deadline after the BB board in September had given them three more months to fulfil the requirement. 

A BB board meeting held on Wednesday at its headquarters in Dhaka with the BB governor Fazle Kabir in the chair granted the time extension to February 4, 2020 to raise their paid up capital, said BB sources.

‘The BB board allowed two months to the proposed Bengal and Citizens banks for fulfilling conditions,’ BB executive director and spokesperson Md Serajul Islam told New Age on Thursday.

He, however, declined to specify the conditions which the entities were yet to fulfil.

In February this year, the BB at its board meeting issued ‘letter of intents’ to two banks based on proposals made by the government, within a few months of issuing its final approval to Bangladesh Police’s Community Bank of Bangladesh.

The proposed banks were initially asked to fulfil regulatory conditions by six months.

The approval process of another bank, People’s Bank, has been stalled due to allegations of money laundering brought against the proposed bank’s chairman, Abul Kashem.

Bengal Group of Industries initiated the move to form Bengal Bank. Bengal Group chairman Morshed Alam is also a member of parliament from ruling Awami League. Morshed’s younger brother Jashim Uddin was named as chairman of the proposed bank.

The proposed Citizens Bank named Jahanara Huq, mother of law minister Anisul Huq, as its chairman.

Formation of limited company and ensuring Tk 500 crore in deposits in paid-up capital in the company’s accounts were the major conditions set by the central bank in the LOIs.

Economists and experts have been criticising the government for approving new banks when the market is already oversaturated and the central bank was having a tough time in ensuring discipline in the banking sector.

In 2013, the ruling party-backed businesses were awarded nine banking licences at the fag end of the first term of the AL-led government’s third consecutive term.

Even though the immediate past finance minister AMA Muhith on several occasions had admitted that the number of banks in the country was high, he endorsed the proposals for four fresh banks towards the very end of his tenure.

At least two banks approved in 2013 are struggling to survive amid allegations of massive irregularities.

Of them, Farmers Bank, now struggling to repay the depositors’ money, was renamed as Padma Bank in January this year to restore its image tarnished by the disclosure of a series

of irregularities through a Bangladesh Bank investigation.

The bank was even barred from issuing any fresh loans without the BB’s approval. As a result of scams and irregularities, the non-performing loans in the country’s banking system has increased to Tk 1,16,288 crore, representing 11.99 per cent of the outstanding loans.