No fund, no guarantee
FID rejects SBL's demand for Tk 6000cr recapitalisation
Kazi Zahidul Hasan :
The Financial Institutions Division under the Ministry of Finance has turned down Sonali Bank's demand for Tk 6,000 crore recapitalisation as part of its plan to decrease public banks' reliance on government fund to meet their capital deficit.
Sonali Bank Limited (SBL), the country's largest public bank, had sought the fund in cash or government guarantee to tide over its shaky financial base and meet the Basel-III norms.
The lender's financial positions have been ruined by massive loan scam of Hallmark Group, rise in defaulted loans and its failure to sell-off mortgaged properties of wilful defaulters.
On February 11 this year, SBL in a letter to Senior Secretary of the Financial Institutions Division (FID) sought the fund in view of shoring up its capital base.
Subsequently, the FID forwarded the issue to the central bank, seeking its opinion in this regard. But, the country's apex bank raised objection to the bank's plea and sent the view to the FID on June 27 through a letter.
"There is no scope to issue Tk 6000 crore government guarantee in favour of Sonali Bank. So, the FID turned down Sonali's demand and asked it to focus on recovery to improve its financial health," a Senior Finance Ministry official told The New Nation on Saturday, on condition of anonymity.
He said that the decision was taken in line with a government policy. A letter has been sent to the bank authorities notifying the FID's decision.
Earlier, the government took a rigid stance over recapitalisation of public banks in view of their poor performance.
In the last 17 fiscal years, the government had injected a total of Tk 20,584 crore of tax-payers' money into the state-owned banks as capital buffer.
"But such support yielded nothing in improving and strengthening their capital base and performance, rather their financial healths deteriorated further owing to poor governance and imprudent lending," observed the FID official.
As on December last year, the cumulative capital shortfall of Sonali Bank stood at Tk 6936.20 crore.
The bank could not recover a single penny from embezzlement of Tk 3,547 crore by Hallmark Group in the past five years though it floated tenders 60 times for sale of assets of the controversial business group.
At the end of March, the total amount of default loans in Sonali Bank stood at Tk 12,237 crore, according to Bangladesh Bank.
Praising the government's latest stance, former Bangladesh Bank Governor Dr Salehuddin Ahmed told The New Nation that the draining of public money in the name of bank recapitalisation should be stopped forever.
"The government has so far pumped huge money into the public banks for replenishing their capital. But it does not work to improve their capital base, rather increases the government's liabilities," he said.
Salehuddin Ahmed said that the public banks are marred by bad governance and high-non-performing loans. So, without improvement in their governance and loan recovery, injection of fresh fund would not work."
He also stressed the need for quick disposal of pending cases of public banks to help them sale of properties of defaulters.
As of October last year, Sonali has properties amounting to Tk 26,565.21 crore stuck in pending cases.
Of the amount, Tk 20,179 crore was stuck with the Artha Rin Adalat (also known as the Money Loan Court) and Tk 4,120 crore with the criminal courts.
The bank has been fighting with 18,950 cases both in High Court and the lower courts to recover its money from defaulters.