State-run BASIC Bank on Tuesday signed a memorandum of understanding with Bangladesh Bank in line with central bank directions.

A senior BB official told New Age that BASIC Bank had sent a letter on the day with signing copy of the MoU.
He said thehad  BB issued an ultimatum to BASIC Bank to sign the deal within July 17 in a bid to improve the bank’s performance.

The BB sent a copy of the proposed MoU to BASIC Bank on June 18 asking it to sign the deal within July 7. BASIC Bank, however, failed to sign the MoU within the deadline.

The central bank has taken the initiative when BASIC Bank is facing huge criticism from different angels due to its financial scams that occurred with some of its branches, he said.

According to the MoU, the central bank attached

 
26 conditions with the deal including defaulted loan, required capital, single borrower exposure limit and loan sanctioning.
The bank’s defaulted loans will have to be reduced to 5 per cent of the total loan by December 2013 from the existing 17 per cent 

while its credit growth should not exceed 10 per cent annually and 2.5 per cent quarterly.
The BB in its MoU asked BASIC Bank to make reporting to the central bank about sanctioning of any loan of over Tk 10 crore.

The BB restricted the single borrower exposure limit for BASIC Bank to

 
15 per cent compared with that of 35 per cent for other banks.

As per requirement of the MoU, BASIC Bank will have to make up its capital shortfall by December this year. The capital shortfall of the bank stood at Tk 104 crore in December 2012.

BASIC Bank will face financial penalty if it fails to control irregularities in loan disbursement or does not follow the central bank’s conditions, the BB official said.

BB executive director Mohammad Naushad Ali Chowdhury confirmed New Age about signing of the MoU on the day.