The first option that the central bank gave is to dissolve the bank's board and appoint an administrator to run it. The second is to take the bank over and restructure it and the third option is to liquidate the bank.

Early last month, Bangladesh Bank sent these proposals to the finance ministry depicting the Oriental Bank's situation.

Sources in the finance ministry said scrutiny of the proposals is going on and the ministry is examining the possible repercussion of going for any of the options. A final decision is going to be made very soon, the sources added.

Finance and Planning Minister Saifur Rahman during a question-answer session in parliament on Tuesday last said, "The government is considering the formation of new bank companies, merging two or more banks as their financial conditions declined seriously."

Sources said the government might signal the central bank to go for appointing an administrator to run the bank. There is however pressure on the finance ministry not to go for such drastic action ahead of the general elections. But if the government chose to intervene, it will be pressed for keeping the bank's existing board intact.

On contact, the bank's Managing Director CM Koyes Sami told The Daily Star on Thursday that it is very much possible to bring the bank back to track if the bank was provided with Tk 200 crore by the owners. The bank management had already talked to the owners and they responded positively to the management's suggestion, Sami added.

But it will have to be done following certain procedures and it is a time consuming method, Sami said.

Sources said Bangladesh Bank's governor also talked with the Oriental Bank's owner who gave assurance that fresh capital would be injected into the bank to rejuvenate the bank. The owner said the money would be injected through issuance of right shares, the sources added.

The face value of the shares of Oriental Bank is Tk 1000 while it was traded at Tk 790 at Dhaka Stock Exchange on Thursday. Sources said looking at the present condition of the bank it is very unlikely that shareholders of the bank would go for further investments.

A number of top bankers said seven banks were identified as 'problem banks' back in 1994. Six of them have already come out from that status but Oriental continues to be in bad form and has become the only 'problem bank' and its condition is deteriorating. If it is not restructured in line with BB's proposal it might have a negative impact on the entire banking sector.

FINANCIAL CONDITION OF ORIENTAL
In December 2001, Oriental's accumulated loss stood at Tk 86.34 crore which has climbed up to Tk 450 crore in March 2006. Again at the end of March 2006 the bank's overall capital deficit stood at Tk 877 crore.

Only four out of 30 private commercial banks have provisional shortfall. Three of them have a provisional shortfall below Tk 60 crore, while Oriental's shortfall stands at Tk 322 crore in March 06.

The bank incurred a loss of Tk 12 crore in the last few months as it failed to maintain statutory liquidity ratio (SLR) and paid high interest in call money market. Besides, its deposit growth is also declining. Last year its deposit growth dropped by three percent from the previous year.

As of last Thursday, its borrowings from the call money market stood at Tk 41 crore while it owes more than Tk 300 crore to nationalised banks as well as other financial institutions, which are continuously pressurising Oriental to pay up. If Oriental was finally forced to pay up, it will be very difficult for the bank to run even day-to-day business.

Besides, other banks are also reluctant to give it any new loans in the call money market putting the bank in dire straits.

OWNERSHIP CHANGING AND LOSSES MOUNTING
When the bank was set up in 1987, a Jeddah-based Al-Baraka Investment and Development Company and local Amanullah Group -- former owner of Pepsi franchise, had major stakes in it with 34.67 and 40.46 per cent and then it was called Al-Baraka Bank (later renamed Oriental Bank). From the very beginning the bank gave loans to influential people violating regulations and these loans were never recovered. Consequently, it has been always on a losing streak.

One of the bank's big defaulters Abul Khair Litu and his Bengal Group took a huge loan. The bank also gave loans against fictitious names and organisations. The bank filed criminal cases against Litu and obtained arrest warrant. Litu escaped arrest by an ad interim bail.

In January 2002, Al-Baraka sold its shares to a number of Hong Kong-based investors while in December 2001 Amanullah Group also sold its shares to five local companies. It was learnt that Litu purchased those shares using fictitious names and established his control over the bank's management. Consequently, the bank's condition continued to deteriorate.

In 2005, the bank's ownership once again changed hands and Orion Group and its sister organisations bought 83 per cent of the shares. Orion Group's Chairman Obaidul Karim told Dainik Prothom Alo that they have now 42 per cent of those shares while the other 41 per cent belonged to foreign companies. He also said he bought the shares for Tk 34 crore from Litu.

But the bank's situation did not improve this time either and continued to turn from bad to worse day by day. There are allegations that loans have been taken in real and fictitious names violating bank rules. Karim however denied these allegations while talking to Prothom Alo.

Following the labelling of 'problem bank', the bank had an observer appointed by BB who remains present in the bank's board meetings. Over the last few years a number of special Memorandum of Understanding (MoU) were signed between BB and Oriental but things did not improve.

A BB source said the BB-appointed observer used to be present in the bank's board meeting but the bank's influential directors used to get loans from the branches and those loan proposals did not require the board's approval. The bank's higher management also connived with the corrupt practice of the directors, sources said.