The BASIC Bank, a state-run institution which was known as a good performing bank in 2009, is now marked as a severely weak financial institution.
It is now waiting to be merged with City Bank, a private sector bank, under a recent regulatory initiative.
The BASIC Bank serves as a textbook example of how the appointment of a politician as board chairman can lead to the downfall of a bank within only five years.
Once upon a time, the bank boasted a clientele of prosperous businesses and attracted talented students due to its efficient management and excellent facilities. A large number of students used to dream of joining the bank following their graduation.
It has now emerged as a burning question -- what led the bank to such a weak level and to the impending merger?
The bank saw the clients’ trust deficit worsened following the announcement of the merger with a private bank. Different government institutions withdrew deposits of more than Tk 20 billion from the bank, exacerbating its crisis. Now, the bank is only able to continue its operations with assistance from the central bank.
Meanwhile, the BASIC Bank has formally requested the government to merge it with a government bank, expressing objections to merging with any private banks.
The downfall began at the bank in 2009 with the appointment of former lawmaker Sheikh Abdul Hye alias Bacchu as chairman. He got his tenure in the post extended despite rampant irregularities.
Under his chairmanship from 2009 to 2014, the bank registered unprecedented levels of corruption and mismanagement and saw a large amount of deposits being tricked out in broad daylight.
Bangladesh Bank, finance ministry, and other government agencies turned a blind eye to all the irregularities and misappropriation of money.
Such an organised looting of a bank is quite unprecedented in history.
In the aftermath, a staggering 64 per cent of the loans disbursed by the BASIC Bank is now defaulted, with its losses totaling Tk 42.3 billion over the past decade. The financial accumulation of the irregularities taking place during the tenure of Abdul Hye Bacchu is also around Tk 45 billion.
Currently, the bank is struggling to maintain its regular operations.
Alauddin A Majid assumed the role of chairman following Abdul Hye. During a conversation with Prothom Alo, he revealed a myriad of irregularities in loan disbursement in the BASIC Bank.
Providing an example, he said a client requiring Tk 100 million of loan used to get a loan of Tk 1 billion. The additional amount was later shared among the unscrupulous people.
Without any discussion on loan applications at board meetings, they used to add the decisions on loan approvals to the meeting resolutions. Thus, the bank was brought down to its knees by taking out the money in the form of loans.
He further said a significant number of government officials were on the board, but they refrained from opposing the irregularities. They even secured promotions later. Hence, a good bank is sinking now.
Regarding the way outs, he said it is quite impossible to realise the money through legal actions. Rather, the bank should gear up its negotiations to collect the loans.
Who are responsible?
Before the downfall, the BASIC Bank used to post handsome profits as prominent business groups used to take loans from it to run their businesses. The industries secretary used to serve as the bank’s ex-officio chairman.
In 2009, the government went beyond the practice and appointed former lawmaker Sheikh Abdul Hye Bacchu to the bank’s board of directors as the chairman. Sometime later, the bank saw its financial mechanisms collapsed. It began recruiting manpower without any formal tests and the recruits have now turned its burden.
An investigation, carried out by the Bangladesh Bank, revealed that a whopping Tk 45 billion was misappropriated during the five-year tenure of Sheikh Abdul Hye Bacchu. Although the disclosure triggered widespread criticisms, the government facilitated a respectful departure for Abdul Hye. He has since been living a lavish life with the looted money.
According to the investigation report, Sheikh Abdul Hye Bacchu, during his chairmanship, bought a house in Dhaka with Tk 1.1 billion. He received as a bribe a large portion of the billions of taka his bank disbursed in loans.
He also bought two plots near the Bashundhara residential area in Dhaka that now cost nearly Tk 2 billion. Prothom Alo released a report in November last year, saying that Abdul Hye was trying to sell the property.
Besides, six ships were bought in the name of his family business – Eden Fisheries – and two were bought in the name of his brother’s business – Crown Fisheries. These are priced at nearly Tk 1 billion. However, it was learnt that he sold out the ships.
Despite all these irregularities, he remained out of the purview of the law until recently the Anti-Corruption Commission (ACC) pressed charges against him. The ACC submitted 59 charges against 145 people, including Abdul Hye. He has been accused of 58 charges.
However, the responsible officials have no idea about his current whereabouts.
Most of the government officials who were appointed as directors of the BASIC Bank during the tenure of ABdul Hye received promotions to different important positions. However, some bankers are languishing in jail, and some beneficiary businessmen are either out on bail or absconding abroad.
Top loan defaulters
As of December 2023, the total loan outstanding of BASIC Bank stood at Tk 128.68 billion while the amount of defaulted loans stood at Tk 82.04 billion, which is 64 per cent of the total loan. The bank’s other indicators including security deposits and capital deficit also perform poorly.
Of the bank’s defaulted loan, an amount of Tk 43.9 billion is held up by 25 clients. Among them, Max Sweater, AB Group and SPDSP have regular loans while all the rest of the borrowers have defaulted. The bank's top defaulters Amader Bari, New Dhaka City Development, Emerald Auto Bricks, Ali Group, Bangladesh Development Company, Nilsagar Agro & Allied, Fiaz Group, Aristocrat Group, Mimco Carbon Limited, Vasavi Fashions, Welltex Group, Rising Group, Crystal Steel & Shipping, Basar Group, Zeil Wears, Map & Muller Group, Well Well, Regent Weaving, IG Navigation, Bay Navigation, Emerald Oil & Allied & Profusion Textiles Limited.
A central bank official who was involved in the monitoring of BASIC Bank told Prothom Alo that armed persons of the government agencies were present at the bank’s board meeting, which is why whatever the chairman said had been approved at the meeting and there was nothing to do at that situation.
Tk 42.30 loss
BASIC Bank had been making more or less Tk 500 million in profit annually. But when former lawmaker Sheikh Abdul Hye became the bank’s chairman and started lending the clients aggressively. As a result, the bank made a profit of Tk 970 million in 2011. Sources said bank clients paid loan instalments at the beginning to maintain their goodwill, and eventually the bank made a mere Tk 20 million in the next year. BASIC Bank incurred Tk 42.30 billion in loss between 2013 and 2022.
The bank incurred an operating loss of Tk 3.86 billion in 2021 and Tk 1.09 billion in 2022. The bank saw a maximum loss of Tk 14.93 billion in 2016. It has been 10 years since Sheikh Abdul Hye left, but the bank continues to struggle.
Prothom Alo could not reach BASIC Bank managing director Anisur Rahman for a comment.
However, he told Prothom Alo recently that it has been difficult to fix the bank’s balance sheet due to higher deposits while defaulted loans are not being recovered properly. It is essential to maintain a balance between deposit collection and loan disbursement in the banking business. Had they received deposits at low interest from the government, the bank would have survived, he added.
Analysts said BASIC Bank will never achieve its past glory.
Moinul Islam, a retired professor of economics at the University of Chittagong, told Prothom Alo the government destroyed the BASIC Bank in a planned way, and Bangladesh Bank and other government agencies helped it. He added that now there is no way other than the merger of BASIC Bank, but the merger should not take place with a government bank, not the private City Bank.