The government yesterday dissolved the infamous board of BASIC Bank over its role in financial irregularities that cost the state-run lender Tk 4,500 crore in the last four years.

The seven-member board of BASIC (Bangladesh Small Industries and Commerce) Bank has been dismissed "on the basis of the investigation report of the central bank” on the scams in the bank, the

Banking and Financial Institution Division of the finance ministry said in a circular.

This is the second time the board of a state-run bank was fired for financial anomalies in a span of less than two years. In December 2012, the board of Sonali Bank was reconstituted following the Hall-Mark scam.

Banking Division Secretary M Aslam Alam said the division had conducted functional audit in BASIC bank's Culshan, Shantinagar and Dilkusha branches.

"On the basis of the audit, the central bank fired the managing director of the bank on May 29 this year, and also recommended dismissing the entire board," he told The Daily Star.

"We have dissolved the board in line with the Banking Companies Act, the central bank report and the audit."

The division yesterday appointed Alauddin A Majid, chairman of state-controlled Krishi Bank, as the new chairman of BASIC Bank. He has been relieved of his current responsibility with immediate effect.

It also accepted the resignation letter sent by Sheikh Abdul Hye Bacchu, the main accused behind the current financial straits of BASIC Bank, to the ministry a day earlier.

Bacchu stepped down on Saturday, just two months before his second term as board chairman was to expire.

BASIC Bank was one of the best performing financial institutions till 2009. But it has been mired in financial irregularities since Bacchu assumed office in 2009.

During his tenure, the bank's indicators - from capital adequacy ratio to nonperforming loans and credit rating -- had witnessed a free fall. Interestingly, despite this dismal performance, Bacchu was offered a second

term in office in 2012.

It was during his new term that the magnitude of irregularities by the bank's board grew. The irregularities amounted to over Tk 4,500 crore, according to Bangladesh Bank.

He single-handedly controlled the bank and granted loans in defiance of recommendations from the bank's credit committee.

During his chairmanship, loans were extended to defaulters, and there were instances where loans were issued even before clients opened their bank accounts, among other irregularities.

The banking secretary said the finance ministry was taking initiatives to improve the performance of BASIC

Bank and all other state-run banks.

According to officials, a performance contract would be signed with the boards of all taxpayer-supported banks. Both the chairman and the managing director of the banks would be signatories to the deals and held accountable to the finance ministry.

"The ministry will review progress on a quarterly basis," Alam said.

Banking Division sources said the finance ministry had selected four directors for the BASIC Bank board. They also got a clean chit from the central bank that checked whether or notanyofthem was a loan defaulter.

They are: Prof Mojib Uddin Ahamed, chairperson of tourism and

hospitality department of Dhaka University, Hasan Mahmud, a chartered accountant, Md Asaduzzaman, deputy managing director of Bangladesh Commerce Bank, and Raihana Anisa Yusuf Ali, ex-managing director of state-run House Building Finance Corporation.

The government will issue today a circular regarding their appointment. Two directors from the finance and industries ministries will also be included on the board.

Meanwhile, Anti-Corruption Commission Chairman Badiuzzaman said the ACC would resume its suspended enquiry into the BASIC bank scam if the finance ministry or

Bangladesh Bank wanted it to.

"We suspended the investigation after Bangladesh Bank signed a Memorandum of Understanding with the bank [BASIC Bank] to resolve the problem," toldThe Daily Star yesterday.

"We have already served notices on two of the bank's officers and their family members, asking them to submit wealth statements," he said.

On May 25, the ACC issued notices to BASIC Bank Deputy Managing Director Monaem Khan and his wife Sahana Parvin, and its General Manager Mohammad Ali, his wife Kismat Ara and son Abdul Momin Chowdhury to turn in their wealth statements.