CBK assures tea farmers money held in Imperial is intact

The Central Bank of Kenya (CBK) has moved to calm the nerves of tea farmers with an assurance that their money held in the troubled Imperial Bank remains intact despite the current regulatory seizure.

The Kenya Tea Development Agency (KTDA) is one of the 5,700 large depositors whose fate will be known by the end of this month after the CBK completes a forensic audit on the bank’s accounts.

By the time the bank was placed under receivership in October last year, KTDA farmers had amassed fixed deposits of up to Sh2.9 billion.

“Even as we carry out the exercise, our number one priority are the depositors and we mind them,” CBK Governor Patrick Njoroge told Senate Committee on Finance last week.

The CBK started paying depositors’ savings of up to Sh1 million in December last year with a promise that a structured payout plan for large depositors would be announced this month.

Dr Njoroge said that small depositors of savings less than Sh1 million in the bank accounted for 89 per cent of depositors.

Imperial Bank was put under receivership after it emerged that former managing director Abdulmalek Janmohamed ran an elaborate fraud scheme that robbed the lender of Sh34 billion over a period of 13 years.

READ: Tea farmers’ Sh2.3bn deposits at risk with Imperial collapse

Details of the massive fraudulent scheme emerged when Imperial Bank directors sued 20 companies and individuals related to Mr Janmohamed seeking to recover the colossal amount.

The bank was put under receivership at a time preparations to pay farmers their final payments were in top gear.

It has since emerged that managers understated the Imperial Bank’s deposits by Sh38 billion and squeezed its loan book in efforts to hide a massive fraud scheme that would later lead to its closure.

A proposal by shareholders to capitalise by injecting Sh10 billion to make the bank more liquid in order to protect depositors was turned down by the CBK on grounds that it was not sufficient.

The shareholders’ capital was to be topped up by converting large depositors’ cash to equity.

Dr Njoroge said the proposal was declined as it did not give the bank a good chance of remaining open and it had the potential of making depositors unfairly bear the risk.

“As such, Sh10 billion or even Sh20 billion is a non-starter. We want to have a proposal which would have the best chance of reopening the bank and letting it remain open,” he said.