BASIC's newly rescheduled loans already turning bad

As much as Tk 700 crore out of Tk 3,000 crore loans rescheduled by BASIC Bank between 2014 and May 2016 became bad loans again, according to the bank.

Bad loans squeeze a bank's investment capacity as the lender has to keep 100 percent provision against the loans as per the decision of the central bank.

But on the bright side, BASIC is getting responses from the defaulting borrowers in recent days after the Anti-Corruption Commission arrested two of the state-owned bank's wilful defaulters this year.

"Around 25 defaulting borrowers who owed to the bank over Tk 800 crore have contacted us and expressed their willingness to reschedule their loans after ACC's crackdown," said Alauddin A Majid, chairman of the bank.

The borrowers believe they would not face ACC's arrest if they settle their loans with the bank, he said.

The ACC in March this year arrested three borrowers of BASIC Bank for their alleged involvement in loan scams.

The arrestees were: Akbar Hossain, owner of Asian Shipping BD; Syed Hasibul Gani, chairman of Emerald Dress; and Foyezunnesa Nabi, managing director of Farshi International.

The commission found Gani involved in a scam of Tk 206 crore, Hossain in Tk 5 crore and Nabi in Tk 34 crore.

The ACC filed 56 cases last year accusing a total of 110 people and organisations for gross loan irregularities amounting to about Tk 4,500 crore.

Of the accused, 27 were bank officials and the rest borrowers and surveyors.

BASIC, which succumbed to reckless lending during the tenure of its controversial chairman Sheikh Abdul Hye Bacchu between 2009 and 2013, is now trying to get back on its feet by rescheduling the loans lent then.

After restructuring the board and management in 2014, it moved to reschedule Tk 3,000 crore out of Tk 4,500 crore in bad loans.

The move is helping the bank in many ways. For instance, its bad loans and provisioning requirements have declined.

But most importantly, it is now able to make proper documentations against the loans and reduce the risks as well.

One of the best-run financial institutions until 2009, BASIC's downfall started when Bacchu took over as chairman in September that year.

The bank lent around Tk 5,500 crore during his tenure, most of which were approved and disbursed on inadequate documents and inflated mortgages. Of the amount, Tk 4,500 crore turned bad, throwing the once best state-owned bank into severe trouble.

Its dire state compelled the government to dissolve the Bacchu-led board in 2014 and appoint a new set, headed by Majid. The central bank also fired the then managing director of BASIC, Kazi Faqurul Islam, for presiding over the irregularities.

Later, the bank has identified that about Tk 9,000 crore remained outstanding to only 214 borrowers and the majority of the loans were disbursed by the Bacchu-led board.

"It is a tough task to recover all the loans, but we are on track. It takes time," said the chairman.

The government provided Tk 1,578 crore to state banks last fiscal year to meet their capital deficit and yet it was not enough for the institutions.

Of the sum, BASIC was given Tk 1,200 crore, Sonali Tk 178.41 crore, Krishi Tk 140.08 crore and Rajshahi Krishi Unnayan Tk 55 crore.