BASIC drowning in default loans

BASIC Bank continues to be overwhelmed with default loans despite going on a loan rescheduling spree, with the scam-hit bank logging in operating loss of Tk 118 crore last year.

In 2018 the bank rescheduled loans of Tk 1,286 crore, 35.52 percent more than in the previous year, when it registered a profit of Tk 35 crore.

Still, the bank's non-performing loans hit a peak of 57.55 percent of total outstanding loans at the end of December last year, up from 52.73 percent a year earlier.

The default loans increased as the large amounts of loans that the bank had regularised during 2014 and 2015 have been reclassified again, said Alauddin A Majid, chairman of BASIC Bank.

The bank had regularised more than Tk 5,500 crore of loans during the period with little down payment.

Moreover, the bank fell into huge loss as it had to comply with the government's instruction of lending at 9 percent and taking deposits at 6 percent, he said.

On one hand, the bank is struggling to attract deposits at this low rate, and on the other hand it is lending at minimum margin.

“This squeezed our earnings,” the veteran banker said.

The bank is facing a deposit crisis: at the end of December its loan-deposit ratio stood at 109 percent, which is way past the Bangladesh Bank-imposed ceiling of 85 percent.

Its deposit growth was 8 percent in the negative at the end of December and its loan growth 4.70 percent.

Last year, its deposit base shrank 7.92 percent to Tk 13,181 crore and its capital shortfall widened 22.09 percent to Tk 3,394 crore.

The bank has been without a managing director for five months now after Muhammad Awal Khan stepped down from the post in November last year.

The delay in appointing his successor has weakened BASIC's deposit collection and lending activities, said a senior executive of the bank.

“The government process for appointing a managing director is almost done. The bank will get a new MD soon,” Majid said.