Bangladesh Bank to rescue problem banks

The Bangladesh Bank is set to rescue problem banks including some Shariah-based banks controlled by S Alam Group by managing liquidity or merging a few.

For instance, Exim Bank has already been provided with Tk 1,000 crore special liquidity support from the central bank for 90 days, documents show.

The condition of a few crisis-hit banks is at the stage of bankruptcy but the government has no plan to declare them bankrupt, said BB Governor Ahsan H Mansur at a press conference yesterday.

Those banks can stage a comeback if they get policy support from the central bank, he said, adding that the BB will revive them by merging with stronger ones.

The central bank will not provide liquidity support by printing money as before but those lenders can avail such support through inter-bank money supply, with the BB acting as the guarantor of the ailing banks.

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6 banks with ties to S Alam barred from lending

So far, seven of the ailing lenders, whose boards were reconstructed recently, verbally requested the central bank for liquidity support to repay the depositors' money.

One such back is Global Islami Bank, whose Chairman Mohammad Nurul Amin told The Daily Star that they will meet with the BB governor today to seek liquidity support to repay the depositors' money.

The new National Bank chairman Abdul Awal Mintoo told The Daily Star in an interview recently that the BB has an obligation to provide support for three reasons: for the sake of the country's economy, for the sake of depositors and for the sake of customers who are involved in production.

Nine banks including six S Alam-controlled ones were facing a severe liquidity crisis for more than a year due to huge irregularities and scams but the central bank suspended the liquidity support for them after the ouster of the Awami League-led government.

On August 12, the central bank instructed all banks not to honour cheques worth more than Tk 1 crore of the nine banks.

The banks are National Bank, Padma Bank, ICB Islamic Bank, and six others in which the S Alam Group holds majority stakes: Islami Bank, First Security Islami, Social Islami, Union, Global Islami and Bangladesh Commerce Bank.

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A senior central bank official who is observing the restructured banks told The Daily Star that only Islami Bank was able to reduce its liquidity crisis among the six banks that were under S Alam Group's control.

The other five banks -- Social Islami, Global Islami, Union, First Security Islami and Bangladesh Commerce Bank face a severe liquidity crisis, as per the central bank official.

Those five lenders will not be able to run their banking activities without liquidity support.

The rest of the restructured banks are National, Exim, United Commercial, Al Arafah Islami and IFIC. Of them, National and EXIM are in tight liquidity situations.

In yesterday's press conference, Mansur said that every depositor will get back Tk 2 lakh from the previous Tk 1 lakh against bank deposit insurance if any bank becomes bankrupt.

As much as Tk 70,000 crore has gone outside the banking sector and of them Tk 30,000 crore have been returned, he said.

Now, the cash withdrawal limit has been lifted but around 10 banks still have problems so their customers will have to be patient for a little longer.