Farmers Bank goes to HC, gets stay order on BB fine

Bangladesh Bank fined Farmers Bank Tk 10 lakh for covering up loan-related information, but it could not realise the fine as the private bank obtained a stay order from the High Court against the central bank's order.

“The High Court stayed the central bank's order for four months,” Anupam Biswas, a lawyer of Farmers Bank, told The Daily Star yesterday.

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The HC issued the order in response to a writ petition filed by Farmers Bank on January 11, just three days before the expiry of the deadline for the fine.

This was the first time a commercial bank moved the HC against the regulator's decision on fining it, said BB sources.

The BB on January 3 sent a letter to the newly-established bank's managing director, informing him of the fine.

The central bank last week appointed an observer to the bank after it found that the bank's health was deteriorating fast.

According to the letter, the bank disbursed loans of Tk 38.26 crore to six companies -- EBL Securities, International Securities, Prime Islami Securities, Kazi Equities, BD Securities and Union Capital. But the loans were shown as investments, which the BB termed a punishable offence.

The central bank said Farmers Bank committed the offence in a bid to conceal information regarding its loan-deposit ratio.

“The bank hid information deliberately and knowingly. Your response is not acceptable to us,” said the BB letter, asking the commercial bank to pay the fine within 10 days of the issuance of the letter.

The fine was imposed as per section 109 (11) of the Bank Company Act 1991, read the letter.

The regulator also warned the bank of adjusting the fine amount from the Farmers Bank's account with the central bank if it failed to pay the penalty on time.

In May last year, the BB had ordered the bank to remove its executive committee Chairman Mahabubul Haque Chisty. But the order was later stayed by the High Court.