New development bank begins operations

Dhaka, Jan 3 (bdnews24.com)—The Bangladesh Development Bank Ltd (BDBL) began operations on Sunday, in a bid to promote the country's industrial sector, despite inheriting crores of taka in bad loans.

The new bank resulted from a merger of two failing state-owned entities, the Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Sangstha (BSRS), which were in crisis over unrealised loans.

Finance minister AMA Muhith formally launched the bank's operations at a hotel in Dhaka.

"BSB and BSRS have failed to perform efficiently," he said.

Touching upon a general trend of Bangladesh's banking sector, Muhith said the banks failed to strike a balance between disbursement of loans to set up an industry and loans for their working capital.

He said this resulted in sick industries.

"The upcoming industrial policy should have a provision where lenders would also have to provide industries with working capital to operate."

Terming sick industries is "a shame for the nation", the finance minister said, reiterating that a guideline to rehabilitate such industries is on the cards.

However, some sick industries will be impossible to turn around. He suggested a 'fire-sale' for such companies to unload them from the government's hands.

TK 2,500 CRORE IN BAD LOANS

The Development Bank has an authorised capital of Tk 1000 crore ($144.3 million) while its paid-up capital is Tk 400 crore.

BDBL chairman Nazeem Ahmad Choudhury, however, has expressed concerns from the start.

"As the defunct organisations (BSB and BDBL) failed to make money from their investments, the BDBL does not have adequate funds to invest."

The new development bank has inherited classified loans of about Tk 2,500 crore due to the failure of its parent companies, said Choudhury.

"I would ask the government to take initiatives to hand over or sell these liabilities to an asset recovery and management company."

He also said the newly-formed bank faced problems regarding manpower, expertise and salary structure.

Choudhury also said as many as 850 officials were working for the two defunct SOEs, but their expertise is in question. At least 200 more staff are expected to be appointed for the new venture.

The audience also heard from additional secretary of finance ministry, Shafiqur Rahman Patwari and BDBL managing director Mizanur Rahman.

QUICK MERGER

BSB and BSRS, with almost similar functions, were established in 1972, to provide loans and facilities to industrial institutions, help set up new industries and expand investment in Bangladesh.

However, they failed to meet expectations. In 1992, the government moved to privatise BSRS, but hit a snag.

The immediate past caretaker government subsequently launched an initiative for a merger between the two non-performing lenders.

The two boards sat on December 8, 2009 to fix a vendor agreement schedule with the government, which was inked on December 31.

As per the merger plans, the accounts of the two organisations were also consolidated in December 2009.

The BDBL plans to operate across the country setting up branches at the district level.

The defunct BSB had 15 branches while the BSRS has two.

BSB and BSRS have financed 174 and 69 projects to date, according to their websites.

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