Blame lies mainly with the board

An external audit into the BASIC Bank scams has outright blamed the board led by its former chairman Abdul Hye Bacchu for presiding over a period of irregularities that cost the lender Tk 5,000 crore.

Since the scams came to surface in 2012, several investigations have been carried out to find the culprits but those couldn't identify the wrongdoers at the state-run bank.

However, the recent functional audit by two private firms has accused more than 100 officials of irregularities. It has largely held responsible for the anomalies the bank board that supervised the lender from 2010 to 2013.

Seeking anonymity, a central bank official said the once profitable bank became a loss-making one after Bacchu was made its chairman.

Recently, the current board told Finance Minister AMA Muhith and the parliamentary standing committee on finance ministry that a clear-cut robbery took place at the bank, not only in the case of loan disbursement, but also in recruitment, opening of new branches and renting offices.

On condition of anonymity, a finance ministry official said the audit identified the persons involved in the irregularities. Now the ACC would be able to move against them.

The audit found the involvement of 17 board members, including government and non-government representatives, in the anomalies. They had worked as directors from 2010 to 2013.

The present board of BASIC Bank appointed MABS & J Partners and SF Ahmed & Co to identify the irregularities and the culprits after it took over last year.

The two firms audited 214 borrowers of the bank's seven branches.

In April, the firms submitted a 1000-page report to BASIC Bank. Copies of the report were also sent to the finance ministry, Bangladesh Bank and the ACC, which is still investigating the scams.

“In most of the cases that we have audited, it has been found credit facilities were approved for selected borrowers by the board of the bank in different forms despite the proposals were placed to the board identifying gross irregularities, incompleteness, negative recommendations or observations and not having backed by required collateral and other relevant important documents,” said the report. 

The auditors examined the loans given to 214 borrowers at the bank's main branch and its Gulshan, Dilkusha, Karwan Bazar and Shantinagar branches in the capital, and Agrabad and Jubilee Road branches in Chittagong city.

The audit found that the branches disbursed loans before receiving approval from the board. Besides, credit facilities were given against forged documents.

The branches forwarded loan proposals to head offices before the clients opened their accounts. The board also approved loan proposals without recommendations from branches.

The then board's approval of a loan to private firm New Auto Define was an example of how irregularities took place in giving loans to 214 borrowers.

In 2010, the board approved the loan under miscellaneous agenda despite various adverse observations against the loan proposal.

The report said the loan was sanctioned in a day of the loan application's submission. The borrower has not paid a single taka since it took the loan, and it now owes Tk 101 crore to the bank.

Another borrower, Techno Design & Development Ltd, was given a Tk 80 crore loan though two committees of the bank made negative observations about it.

The bank disbursed Tk 60 crore in 45 days of the loan's approval and the branch concerned didn't verify how the money was spent. 

Serious objections and irregularities are indication of breach of trust and abuse of power entrusted to the board under the guidelines of Bangladesh Bank, according to the report.

“It also appears that the board has ignored its own instructions for compliance to be followed in case of previous credit facility approvals and in some cases violated its own policy just for the sake of approving huge amount of irregular loans, putting a huge sum of depositors' money at risk,” said the report.

The board members, who had approved loans in meetings, and also the members, who didn't dispute the minutes in subsequent meetings, were responsible for the irregularities, said the report.

“In these circumstances, it can be concluded that availing of such huge amount of loans by the concerned borrowers and failing to repay them in instalments in time are evidence of their malafide intention.”

The board approved loans knowing well that the bank was confronting acute fund crisis.

The loans were approved with a “subject to” clause for rectification of the irregularities identified by the loan committees. It clearly shows the intention to transfer their responsibility to some other persons.

The report said the entire process of approving loan proposals was completed within a very short time immediately before the board meetings, leaving no time for inclusion of a separate agenda for such cases.

The approval of huge amount of loans without complying with the norms made the loans non-performing, according to the audit report.

Contacted, BASIC Bank Chairman Alaudddin A Majid said they already took action against some of the bank officials whom the audit found involved in the irregularities.

Criminal cases would be filed against the bank officials and the borrowers who worked in connivance to embezzle money from the bank, he added.