As liquidity crisis appears, the scam hit Sonali Bank has begun to depend largely on the inter-bank call money market to maintain its daily banking activities, officials said.

Sonali, the country's largest state-owned commercial bank, is facing huge financial crisis due to the recent loan scandals.

 
In one of the scam, Hall-Mark Group and five other companies in connivance with several bank officials and executives embezzled nearly Tk 3,600 crore (funded and non-funded) from the bank's Hotel Ruposhi Bangla Branch, creating immense liquidity pressure on the bank.

Earlier, it shelved many business decisions and disbursement of fresh loans to its clients due to fund crunch.
Available data shows that the bank has borrowed Tk 825 crore from the money market in past few days in order to ease the bank's liquidity crisis. 

  
The bank borrowed Tk 350 crore on December 18, Tk 275 crore on December 26 and Tk 200 crore on December 27 (Thursday).  
"The bank hit by scams is under duress to borrow funds from the money market," said a senior Sonali Bank official told The New Nation yesterday.

He added that the banks financial condition had become weak and as much, it had to borrow funds to deal with the daily transactions.  
"The heavy borrowing by the public entities also created immense liquidity pressure on Sonali Bank's treasury," the official further added.

The official noted that borrowings by the state-owned enterprises (SOEs) from Sonali Bank kept on mounting and for some instances their loans moved up to 50 per cent year-on-year.

   
He, however, said that borrowing funds from the call money market is a normal practice for the banks and financial institutions in which they have to borrow and lend money from the market in any crisis moment.

 
According to Bangladesh Bank (BB) data, Tk 44,185.50 crore was traded in the inter-bank call money market between December 18 and 27 at 11 to 14 per cent interest rates.

BB officials said the inter-bank call money market witnessed some volatility over the last few days with rising liquidity pressure from the banks and financial institutions.

The weighted average rate (WAR) call money, however, reached 10.33 per cent during the period.

                                                      AHM Habibur Rahman

AHM Habibur Rahman, the newly appointed chairman of scam-ridden Sonali Bank, has inherited a lot of challenges from his predecessor in bringing back the bank's lost image.

As the bank closes its balance sheet on December 31 for the year, Rahman will have to get down to business right away.

The finance ministry issued an order yesterday appointing Rahman, a former Dhaka University professor, as the bank's chairman replacing Kazi Baharul Islam. The appointment has been made effective immediately.

“I will work with an utmost commitment for the sake of the bank and the country,” Rahman told The Daily Star by phone.

Currently, Rahman is the dean of Business Faculty at Primeasia University. He was a former chairman of the Board of Directors of Bangladesh Shilpa Rin Shangstha (now merged with the BDBL) during 1999-2000.

State-run Sonali Bank was the focal point in the Tk 3,600 crore loan scam that involves a little-known textile company, Hall-Mark Group. The scam has rattled the country's entire financial sector and created volatility in the money market.

Baharul Islam continued his duty as chairman of the board although his three-year-tenure expired in September. The government had dissolved the Sonali Bank board, but kept him as the bank's chairman until now.

First Security Islami Bank Limited (FSIBL) signed an agreement with IT Consultants Limited at a city hotel recently.

As per the agreement, FSIBL will be able to connect with over 3500 ATM machines across the country as a member of ‘Q-Cash Consortium’.

With this, FSIBL has become the 27th member of the ‘Q-Cash Consortium’ through, said a press release.

Sayed Waseek Md Ali, Deputy Managing Director of FSIBL, Kazi Saifuddin Munir, PhD, Managing Director of IT Consultants Limited, Taher Ahmed Chowdhury, SEVP of FSIBL, Osman Haidar, Director and Ahsan ullah Chowdhury, Director of ITCL attended the signing ceremony.

Local banks prefer borrowing from foreign banks and lending agencies because of relatively low interest compared to the cost of locally mobilised funds, market insiders said.

Prime bank Limited (PBL), one of the country’s largest private commercial bank that provides conventional banking services, has already obtained $5 million from a bank in Qatar and another $3 million from a bank in UAE recently.

Talking to daily sun, PBL Managing Director Md Ehsan Khasru said a total of $90 million foreign fund remains in the pipeline, which his bank would receive by next January. “I went for foreign funds because of low rate of interest compared to locally mobilised funds,” Khasru said.

He said local banks including the Prime Bank have offered above 12 percent interest to the depositors for term deposit during the liquidity crunch triggered from the government’s high bank borrowing in the last financial year.

He said the rate of interest for lending by banks also went up due to the higher cost of funds.

He said the business community often protests banks’ lending rate and become reluctant to make fresh investment. “Without investment, a banking company cannot earn profit,” said the top banker.

He said his bank revised the interest rate for deposit and renegotiates the rate with depositors. “Despite the reduced interest rate, a deposit in my bank is still satisfactory. However, the cost of fund is still higher in case of local funds,” he said. The Eastern bank limited (EBL) has borrowed over $100 million in the current calendar year, an official of the bank said, seeking anonymity.

Bangladesh Bank (BB) sources said the state-owned Sonali Bank (SBL) had an arrangement of $60 million from a bank in the UK last fiscal, which was not executed by the bank authorities.

Source said the local banks have moved to mobilise foreign funds as the local funds become costlier resulting in a fall in overall banks’ investment in the last few months.

The central bank does not have any comprehensive report on the foreign loans obtained by the local banks. Some experts observed that the liquidity strength of banks will get stronger if more foreign funds enter the local banking industry.

The central bank has an embargo on banks to limit within the interest rate for borrowing from foreign lenders at maximum 6 percent.

“The 6 percent rate will need to be calculated including the LIBOR (London Inter-Bank Offered rate),” sources said.

Sheikh Abdul Hai Bacchu, Chairman of BASIC Bank Limited, inaugurates the 61st branch of the bank at Bahubal in Habiganj Wednesday.

BASIC Bank Limited opened its 61st branch with online banking facilities at Bahubal in Hobiganj district Wednesday.

Sheikh Abdul Hai Bacchu, Chairman of the bank inaugurated the branch as chief guest, said a press release.

Kazi Fakrul Islam, MD of the bank chaired the function. Kanak Kumar Purakayasta, AQM Kibria and A Monayem Khan, DMD of the bank were present.