BKB struggling as cash crunch affects LC, remittance services

Dhaka,  Fri,  09 December 2016
Published : 29 Nov 2016, 21:14:01

BKB struggling as cash crunch affects LC, remittance services

Govt owes the bank Tk 15.58 billion
FE Report


Bangladesh Krishi Bank was struggling to operate some of its services due to capital shortfall, officials said.

They said the government owes the country's largest specialised bank Tk 15.58 billion against interest subsidy and interest waiver, creating the capital shortfall and affecting the banking services.

As of June last, the capital shortfall stood at Tk 74.11 billion, according to Bangladesh Bank (BB) data.

The bank was facing difficulties in opening letters of credit (LCs), including the ones of the state-owned organisations, and providing remittance services, a senior executive of the bank said.

Recently, he added, Al Rajhi Banking and Investment Corporation of Saudi Arabia stopped remittance service with BKB.

The executive said it might have a negative impact on the banking business if the services could not be resumed immediately. "For this, a substantial amount of capital should be injected immediately."

One of the top executives of the bank emphasised on doubling the authorized and paid up capital from existing Tk 15 billion and Tk 9 billion respectively to make up the capital shortfall and meet the rising farm loan demand.

"There is no problem operating our normal activities," BKB managing director Muhammad Awal Khan told the FE Tuesday. "Recently, we requested the finance division through banking and financial institutions division to pay the dues."

Replying to a question, he said: "We are trying to resolve the problems related to opening LCs gradually."

The bank is regularly paying instalments against re-finance loans from the central bank-it paid Tk 8.10 billion in instalments in the fiscal year 2015-16, according to a bank source.

It conducts operations through 1,030 branches, including 16 foreign exchange (authorized dealer) branches across the country.

The primary objective of BKB is to provide credit facilities to the farmers for the development of agriculture sector i.e. crop production, fish culture, animal husbandry etc., and entrepreneurs engaged in development of agro-based and cottage industries.

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