Farmers Bank in cash crunch

Depositors are concerned about getting back their money from the trouble-hit Farmers Bank as cases of its failure to pay clients continue to come up.

Bangladesh Bank and the finance ministry have received a number of complaints from depositors -- both institutions and individuals -- about the bank's incapacity to repay money on maturity of fixed-term deposits.

Farmers Bank recently failed to pay more than Tk 229 crore to Bangladesh Climate Change Trust Fund (BCCTF) on maturity of its fixed-term deposits.

The BCCTF, a government trust formed to tackle risks and adverse effects of climate change under the environment and forest ministry, deposited Tk 508.13 crore with the bank's Gulshan and Motijheel corporate branches in November and December last year under fixed-term deposit schemes.

Five of the deposits amounting to over Tk 229 crore became mature between November 24 and December 7. When the BCCTF contacted Farmers Bank to encash the deposits, the bank made excuses to delay payments. 

The BCCTF then contacted the finance ministry and the BB through its parent ministry to help it get the money back.

“The money the BCCTF gets from fixed-term deposits with different banks helps it run its activities. If Farmers Bank does not pay back the BCCTF's deposits, its administrative work will be hampered,” reads a letter of the environment and forest ministry, which was sent to the senior secretary of the finance ministry's Financial Institutions Division and the BB governor on December 12.

The Daily Star has obtained a copy of the letter.

Talking to this newspaper, Dipak Kanti Paul, managing director of the BCCTF, said, “We have sought help from the Bangladesh Bank and the finance ministry to get back the money.”

Another government agency, Bangladesh Inland Water Transport Corporation (BIWTC), deposited Tk 4.8 crore with Farmers Bank under fixed-term deposit schemes. BIWTC's deposits of Tk 1.07 crore with the bank became mature early this month.

“But the bank is dilly-dallying to pay the money,” said a BIWTC official, seeking anonymity.

“Finally, we have requested the central bank and the finance ministry to address our concern.”

Many individuals are also worried about their deposits with the bank.

A number of them told this newspaper that they deposited money with Farmers Bank as it offered returns much higher than those offered by other banks.

Seeking anonymity, one of the depositors said she opened an account with the bank under a deposit scheme of Tk 10,000 a month for three years. She was offered 11.5 percent interest on the deposit -- much higher than the market rate of 7 to 8 percent.

“I have already paid 11 instalments [out of 36]. But I am concerned whether my money is safe with the bank,” she said.

As of December 13, Farmers Bank had deposits of Tk 4,700 crore, down from Tk 5,660 crore on October 30.

Of the deposits, Tk 1,900 crore came from different institutions, mostly public ones.

Withdrawal of deposits of nearly Tk 1,000 crore over the last one and a half months led to deterioration in the bank's financial condition. Depositors lost their confidence in the bank as allegations of corruption and irregularities surfaced against the bank's management.

Eunusur Rahman, senior secretary at the Financial Institutions Division, said they received a number of complaints about Farmers Bank's failure to pay its depositors.

“We have informed Bangladesh Bank of the complaints,” Eunusur said yesterday.

Seeking anonymity, a BB official said the regulator will look into the matter.

Last month, Muhiuddin Khan Alamgir, chairman of Farmers Bank, and Md Mahabubul Haque Chisty, chairman of the audit committee, resigned from the bank's board of directors upon instructions from the BB.

Allegations of irregularities at the bank surfaced within a year after it began operation in June 2013 with Tk 400 crore in capital.

Between September and November 2015, the BB conducted special inspections at the bank's three branches in the city's Gulshan, Motijheel and Shyampur, and found gross violations of banking rules in disbursing loans of Tk 400 crore.

According to BB inspection reports, some of the directors, including Muhiuddin and  Mahabubul, were allegedly involved in sanctioning these loans in violation of the credit rules.