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Bank & Finance - April 22, 2024

Panicked depositors withdrawing money

Over Tk 2000cr withdrawn from Basic Bank; Tk 100 cr from BDBL

Zarif Mahmud : A kind of panic has spread in the entire banking sector centered on the process of merging the weak with the strong and the government bank with the private. Especially, most of the depositors are suffering from the dilemma of whether or not to keep money in the bank. Some are withdrawing money from the bank due to fear.
This list also includes some institutional depositors. A Shariah-based private bank has received 12 deposit refund applications in a few days. Each is a capital FDR. Already, Basic Bank has lost more than Tk 2 thousand crores of deposits. About Tk 100 crores have been withdrawn from BDBL. The situation is almost the same for other banks in the list of mergers. They fear losing their deposits.
When asked to know, the Acting Managing Director (MD) of Basic Bank, Abu Md. Mofazzal told, “Since 2015, Sonali, like Janata, BASIC is also a state-owned bank. For this reason, various government institutions and organizations have deposited money in Basic Bank. With the news of merger with private banks, they started withdrawing money. Various institutions have already withdrawn more than Tk 2000 crores of deposits. Because they think that Basic Bank is going private.
He said, for this reason, the board of directors decided to send a letter to the government to merge with a government bank. A senior National Bank official told on condition of anonymity that it is becoming difficult to retain deposits. Just a few days ago, the old board was dissolved and the new board was formed.
The new board should be given at least six months to a year. A decision to merge now will not be good for the bank. UCB is saying the same thing. A senior official of the bank told, like other banks, there is panic in UCB. Because the depositors are asking for money back.
Meanwhile, Basic Bank does not want to merge with the private sector City Bank. They want to merge with a government bank. The board of directors of the bank has given an official letter to the government stating this.
Earlier on April 9, the bank’s officers and employees also said in a memorandum to the finance minister that they do not want to merge with private banks. Basic Bank is a 100% state-owned commercial bank.
The depositors of Basic Bank are panicking over the decision to merge with private banks. Some of them have started withdrawing deposits from Basic Bank. Government institutions are withdrawing more deposits.
It can be seen from the review of the received documents, on behalf of Shahjalal Fertilizer Company Limited, Head of Department (Accounts and Finance) S. M. Abdul Barik and Managing Director (Acting) Mohammad Ziabul Hossain have applied for Tk 10 crore encashment with FDR interest-principal in a jointly signed letter. The application form was given to the manager of Mirpur branch of Basic Bank on April 15. The letter cites the decision to merge Basic Bank with the private City Bank as the reason for FDR’s monetization.
The managing director mentioned in the letter that in the light of the decision not to keep FDR in private banks in the board meeting of Shahjalal Fertilizer Company Limited.
According to Basic Bank sources, more than two thousand crores of deposits have been withdrawn from the bank in five working days. Some other institutions have written to the bank to withdraw the deposits. The bank is facing severe liquidity crisis. As a result, Basic Bank is not able to maintain Cash Deposits (CRR) and Statutory Deposits (SLR) as required by the Central Bank.
Basic Bank sources also said that the deposit balance in the bank was around Tk 14,000 crore, which has reduced to below Tk 12,000 crore. The loan disbursed by BASIC Bank was Tk 12,868 crore till last December. Of this, defaulted loans are Tk8,204 crores or 64 percent.
The board of directors of BASIC Bank decided to write a letter to the government on Wednesday. Then the letter was given. Earlier, Bangladesh Bank spokesperson Majbaul Haque told the media that Basic Bank is not a government bank.
However, it may be mentioned that Basic Bank is 100% government owned. After the spokesperson of Bangladesh Bank made such a statement, a kind of confusion was created in the public mind.
Officials of Basic Bank say that government institutions kept money in the bank considering it a government bank. Major part of the bank’s deposits come from government institutions and organizations. But when it was told that it was not a government bank and would be merged with a private bank, the government institutions started withdrawing money.
In such a situation, two letters were sent by the Board of Directors of Basic Bank to the Financial Institutions Department of the Ministry of Finance. In one of them it is said that Basic Bank is 100% government bank. Therefore, merging with private banks will not be right. If you want to merge, you should merge with government banks.
In another letter, it is said that the news of the merger of Basic Bank with the private City Bank has spread panic among the depositors. The bank has sought government assistance for this.
A copy of the letter has also been given to the Governor of Bangladesh Bank. On the matter, a director of the bank told on condition of anonymity that government institutions are withdrawing deposits. That is why a letter is given asking for change of decision.
According to the information received from BDBL, Tk20 crore from Khulna branch of BDBL, Tk12 crore from Motijheel branch, Tk1 crore from Islampur branch, Tk3 crore from Srinagar branch, Tk27 crore from Kawran Bazar branch, Tk5 crore from Mymensingh branch, Tk10 crore from Osmaninagar branch, Tk7 crores from the Khatunganj branch and another Tk15 crores were withdrawn from other individual level deposits. Bank sources said that these deposits have been withdrawn after the announcement that BDBL will be merged with Sonali Bank.
Bangladesh Bank basically asked five weak banks to merge with five other strong banks. Although initially this number was 10. According to the decision, state-owned BDBL will merge with Sonali Bank and Rajshahi Krishi Unyanan Bank with Krishi Bank. The process of merging Basic Bank with City Bank, Padma Bank with Exim Bank and National Bank with United Commercial Bank (UCB) is underway.

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