Bangladesh Bank (BB) has rejected a time extension proposal of state-owned Sonali Bank, which sought amortisation process of its accumulated loss of Tk 54.38 billion in next 19 years instead of government-set time period of 10 years.

When the national commercial bank was turned into company in the year 2007, its accumulated losses were estimated at Tk 54.38 billion. At that time the central bank had asked the bank to pay back the amount in next 10 years through its annual profits.

But recently, as per a 20-year development plan of Sonali, it sought to repay the amount in next 19 years, instead of previously fixed 10 years, sources said.

Amortisation means a periodic payment plan to pay a debt or accumulated loss in which the interest and a portion of the principal is included in each payment by an established mathematical formula and the accumulated loss amount is treated as goodwill BB rejected the proposal of Sonali to extend the time as such time extension will not create usefulness for the country’s largest state-owned bank, a senior Banking Division official said on Tuesday.

The official also said the huge accumulated loss of Sonali will turn into goodwill through amortisation process within next 10 years.

Credit and Sick Industry Branch of BB sent a letter to the Banking Division last week on the issue.

Earlier, Managing Director and Chief Executive Officer of Sonali Bank, M Humayun Kabir, through a proposal sought time extension of the amortisation of losses in next 20 years.

According to the proposal sent to finance ministry, Sonali wanted to amortise a loss of Tk 54.38 billion against yearly its profit earning in next 19 years with yearly amortisation of Tk 2.86 billion.

Sonali amortised Tk 2.86 billion of its yearly profit against accumulated loss in 2010, Tk 5 billion in 2009, and Tk 3.50 billion in 2008, said the proposal.

When contracted over phone on Tuesday, Sonali Bank MD and CEO Md Humayun Kabir declined to comment on the matter.

The risk assets of Sonali remained at an alarming stage in the first nine months of 2011( January-September period) calendar year because of weak recovery of its default loans and high borrowings from the call money market.

As per the report, risk assets of Sonali decreased by 9.71 per cent in 2011 compared to Tk 326.90 billion in 2010 calendar year.

According to statistics, in October 2011, Sonali had risk–based assets worth Tk 326.90 billion.

The Daily Sun/Bangladesh/ 25th Jan 2012