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Bangladeshi regulator to confiscate funds of 10 private banks

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Bangladeshi regulator to confiscate funds of 10 private banks

Bangladesh Bank will block funds of 10 private local banks after they failed to achieve their farm loan disbursement target in the last fiscal year, The Daily Star reported.

The central bank will confiscate 3% of the undisbursed farm loan amount of AB Bank Ltd., First Security Islami Bank Ltd., Meghna Bank Ltd., Modhumoti Bank Ltd., National Credit & Commerce Bank Ltd., NRB Global Bank Ltd., Shimanto Bank, South Bangla Agriculture & Commerce Bank Ltd., Farmers Bank Ltd. and Union Bank Ltd. from their current accounts with the banking regulator. The move will take effect in August and the regulator will not serve any show-cause notice, the Bangladeshi newspaper said.

The banks will be notified after the funds are blocked. Bangladesh Bank would only return the funds once the lenders distribute the undisbursed amount along with the fresh targets in the next two fiscal years, the report said, citing an official from the regulator. If the banks fail to disburse the amount, the regulator will not return the funds.

Some of the banks reportedly failed to reach the target because they faced acute liquidity crisis in the fiscal year, an official of a commercial bank told The Daily Star. Others were merely negligent, he added.

Bangladesh Development Bank Ltd. and Sonali Bank Ltd. also failed to meet the target, but the central bank has exempted state-run banks as they already provide voluntary services to the public, according to the publication.

Under a regulatory policy, lenders are required to distribute at least 2% of their total loans to the agricultural sector.