Kampala- Bank of Uganda has agreed to take over management of Bank of India and to suspend all members of the board in March.
A meeting held at the Central bank premises on February 19 and chaired by deputy governor Lois Kasekende, also agreed that the bank liquidates itself by March 31 to allow Bank of Uganda take over formally to avoid distress.
Mr Kasekende said the board meeting of the Bank of India with its Indian directors will officially communicate to the governor, who will then instruct the central bank to appoint a statutory manager of the affairs of the bank, and suspend the bank’s board of directors.
Bank of India Uganda managing director Ajay Kumar Panth acknowledged the meeting took place at Bank Of Uganda this afternoon, Monday, but added that the bank will not close because it is doing well.
He said the closure is dependent on a meeting to be held in March between the Bank of India [[Parent bank in India] and the management of Bank of India Uganda.
“To tell you the truth, this bank is doing well compared to other banks, it is making profits and we can’t just close it but this will also depend on the outcome of the bank management late next month,” said Mr Kumar told PML Daily on phone today.
According to sources at the bank, the management of the Bank of India has already agreed to give Bank of Uganda a liquidation plan to allow the central bank to do close monitoring to ensure that depositors are protected.
This follows a letter written to the bank by Bank of India in India asking the management of bank of Uganda to close the bank by March 31 due to restructuring, recapitalisation and in order to improve on return on assets in Bank of India.
“Due to restructuring and recapitalisation and improving on return on assets in Bank of India, we have decided that with effect from end of March 31, 2018to end business at Bank of India Uganda,” reads the letter in part.
This comes barely a month after bank of India also closed its subsidiary bank in Myanmar in Yangon in Burma on 28 January.
The sources that attended the meeting said the bank was under-capitalised and poses systemic risk to the banking sector in Uganda.
Mr Kasekende said the bank remains open to customers until March 31 when it will be declared liquidated and bank of Uganda takes over.
A source at the bank that asked not to be named, however, said Bank of India Uganda has been doing well financially and that it has a big number of clients across the country, “it is actually one of the fastest growing banks in Uganda,”
The source said Bank of India in India shares fell nearly 5 percent after the Reserve Bank of India [RBI] placed the bank under Prompt Corrective Action Framework due to bad asset quality performance and that the owners now want to have the assets in Bank of India Uganda taken to recover.
Although Mr Kumar said this action will contribute to the overall improvement in risk management, asset quality, profitability, efficiency of the bank, the workers claim money and assets are likely to be taken out of the country, “We call upon depositors to come and get their money out of the bank”.