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National Bank began normal banking operations Today (Thursday), allowing customers to withdraw their deposits according to their needs. The bank will start refunding deposits to customers who applied for withdrawals over the past four days.
According to sources at National Bank, the financially troubled lender has secured Tk 7,000 crore in loans to resume normal banking operations. State-owned Sonali Bank provided the funds against a guarantee from Bangladesh Bank.
Bangladesh Bank has imposed several conditions on the use of the funds. One key restriction is that the money cannot be used to repay deposits held by the bank’s former or current directors. The funds also cannot be used for lending.
In a letter sent to National Bank’s managing director on Monday, Bangladesh Bank outlined the conditions, stating that the liquidity support would carry an interest rate of 10 per cent and have a tenure of three months.
Meanwhile, National Bank collected withdrawal applications from customers between October 11 and 14 to meet their demands for deposits. According to bank sources, nearly 11,000 customers applied to withdraw around Tk 2,000 crore over the four days.
Branches across the country reported customers’ withdrawal requests to the bank’s head office, which subsequently supplied them with the necessary funds.
Initially, the bank has been instructed to refund money from applicants’ current and savings accounts over the next few days. Deposits belonging to other customers will be repaid in phases later.
Bangladesh Bank has imposed 11 conditions on National Bank’s use of the funds borrowed against its guarantee to repay depositors.
Under the conditions, the bank cannot pay cash dividends until the loan is repaid. The funds cannot be used for loans or investments involving former or current directors or entities associated with them. Nor can they be used to repay deposits held by current or former directors, whether in their own names or through other arrangements.
The money also cannot be used to issue new loans or investments, increase existing credit facilities, or disburse previously approved but undisbursed loans.
Bangladesh Bank has further prohibited the use of the funds to settle existing interbank liabilities or placements, acquire loans or investments from other banks, or purchase foreign currency to meet letter-of-credit obligations associated with forced loans or loans against trust receipts (LTRs). The money cannot be deposited with another bank either.
While the guarantee remains in effect, any newly collected deposits must be used exclusively to improve liquidity and meet obligations to ordinary depositors.
The bank’s operating expenses cannot increase by more than 5 per cent compared with the previous year, and the guaranteed funds cannot be used to cover operating costs.
National Bank has also been instructed to report to the central bank every week on how the guaranteed funds are being used.
