State-owned Sonali Bank has lent Tk 7,000cr to financially troubled National Bank for three months, with Bangladesh Bank providing a full guarantee to repay the amount if the private bank fails to do so. Sonali Bank disbursed the loan on Tuesday against the central bank’s guarantee issued on Monday.
The loan carries an annual interest rate of 10 per cent and has a maturity of three months. Under the guarantee, Bangladesh Bank must repay Sonali Bank within three working days if National Bank defaults on the loan.
The central bank will need to create new money to meet the obligation. The latest support comes as National Bank continues to struggle to meet depositors’ withdrawal demands, raising concerns about the safety of their savings and the bank’s ability to maintain normal operations.
On October 8, Bangladesh Bank directed National Bank to ensure adequate cash at all its branches and automated teller machines from October 15 so that customers could withdraw money according to their needs. Bangladesh Bank Governor Mostaqur Rahman on the that day said that the central bank was concerned about the bank’s liquidity position and the difficulties depositors faced in accessing their money.
He instructed the bank to take necessary steps to protect depositors’ interests and maintain public confidence in the banking system. The intervention followed a recent case in which four National Bank depositors approached the High Court after failing to withdraw their savings.
The court subsequently directed Bangladesh Bank to ensure that they could access the money in their savings accounts.
Mustafa K Mujeri, executive director of the Institute for Inclusive Finance and Development (InM), told New Age that Bangladesh Bank should adopt a clear strategy for dealing with crisis-hit banks such as National Bank.
‘The central bank needs to have a clear policy on what it wants to do with these banks and how it plans to implement that strategy,’ he said.
He said liquidity support or loan guarantees should be provided under a concrete and implementable recovery plan, rather than on an ad hoc basis.
The plan should spell out how the bank intends to recover from the crisis, how long the recovery is expected to take and how the financial support will be used, he said.
Without such a plan, repeated support would fail to resolve the bank’s underlying problems, leaving it in the same distressed position, he added.
Mujeri also said that the recovery plan should address the high level of defaulted loans and weaknesses in management, which were among the main reasons behind the bank’s collapse.
National Bank has remained in financial distress despite receiving substantial liquidity support from the central bank.
It has reported losses every year since 2022, while 56.44 per cent of its outstanding loans, amounting to around Tk 24,000cr, were classified as defaulted, according to Bangladesh Bank data.
The bank also faces a loan-provision shortfall of nearly Tk 20,000cr.
Once one of the leading private commercial banks in Bangladesh, National Bank came under the control of the Sikder family after major changes to its board following the Awami League government’s assumption of power in 2009.
Bangladesh Bank restructured the board in 2024, removing the family’s control. The bank has yet to recover from the effects of alleged irregularities and the diversion of funds during the previous management’s tenure.
Its high default-loan ratio, continued losses and liquidity shortages have weakened its financial position.
Financial Mirror/AH
