National Bank destroyed by all quarters

Major changes were brought about to the board of directors of the first generation National Bank in 2009, immediately after the Awami League-led ‘mahajote’ (grand alliance) came to power.

It was in that year that the control of the bank went to the hands of Zainul Haque Sikder, chairman of the Sikder Group. He installed his wife, children, relatives and party leaders on the board of directors, sealing his full control over the bank.

Irregularities began and good investors left. Prior to that it had gained repute as one of the top banks of the country.

Bangladesh Bank’s inspection revealed that after the bank went to the hands of the Sikder family, there were incidents of unwarranted interference by board and loans in various phony names.

Around six years after the changes in the board, Bangladesh Bank appointed an observer to National Bank. But the financial sector regulatory body took no further action. In fact, several regulatory agencies simply sang the same tune along the Sikder family and the other agencies that sided with them. As a result, National Bank just deteriorated further.

In 2009 the bank’s default loans stood at less than Tk 4 billion (Tk 400 crore). Presently that has spiraled up to over Tk 120 billion (Tk 12,000 crore).  National Bank has the highest volume of default loans among the five banks that the central bank has decided to merge with other banks. According to latest records, 29 per cent of the loans provided by National Bank are in default. Over the past two years the bank’s net losses stood at Tk 47.82 billion (Tk 4,782 crore). Under the circumstances, the central bank instructed them over the past three years to halt providing any large loans.

National Bank is now listed among the weak banks in the country. The central bank recommended that it merge with United Commercial Bank (UCB). National Bank has not agreed. On Sunday the central bank suddenly reshuffled the bank’s board, freeing it completely from the Sikder family. Most of those now installed on the new board are members of various business establishments in Chattogram. The question now has arisen as to who now hold the reins of National Bank.

Prothom Alo spoke to a few of the bank’s senior officials. They alleged that the Sikder family had destroyed the bank by taking out loans under various names. Also, several big businessmen close to the government chose National Bank to take large loans, arranged to have interest on the loans exempted and also siphoned the money out of the country.

They used their clout to extract all sorts of benefits. All these quarters thus brought the bank to the brink of destruction. The central bank at times provided policy support, dragging the bank down further.

The officials said that National Bank often failed to keep the cash reserve ratio (CRR) deposited as required by the central bank. So the bank also has accumulated fines.

After serving two years as the managing director of National Bank, Mehmood Hossain retired at the end of December last year.

Speaking to Prothom Alo about this predicament of the bank, he said the government had already imposed taxes on the interest that was being exempted. Those requiring loans of Tk 200 million (Tk 20 crore), were being given Tk 1.5 billion (Tk 150 crore). This money was not invested in any productive sector. Deposits were brought in with high interest and loans given with low interest. The loans were not returned, but the deposits of the clients still had to be repaid with high interest. This created a liquidity crisis and fines piled up, worsening the crisis.

Mehmood Hossain said an efficient board of directors and adept management, with no secret agenda, is required to turn National Bank around. Also, Bangladesh Bank must provide it with policy and cash support. Many government organisations have also taken money from the bank. These funds must be returned. A halt has been brought to providing large loans and this must remain in place. Unless these steps are taken, it will be difficult to retrieve the bank from its present state.

National Bank is one of the first generation banks in Bangladesh’s private sector. When it began operations back in 1983, the bank’s first chairman was the founder vice chancellor of Chittagong University and former finance minister Azizur Rahman Mallick. Though he had no shares in the bank, the investors at the outset kept him as chairman for 10 years. After that the shareholders took over as chairmen. National Bank still had a sound reputation as a good bank then. Things changed from 2009.

Zainul Haque Sikder took over as the bank’s chairman that year. It is alleged that after that the good investors were more or less forced to leave the bank. The bank began to deteriorate. But the Sikder family’s wealth began to grow. The Sikder group’s business expanded to insurance, power, health, education, housing, construction, hotels, tourism, aviation and more. Documents indicate their business has expanded overseas too. They have investments in the US, UAE, Thailand, UK, Singapore, Switzerland and others countries too.

According to a report of the Bangladesh Bank regarding National Bank, “Many of the loans taken from National Bank have been deposited in the bank accounts of the Sikder family and their companies. The family is also taking money from the bank through phony loans.” These loans are not being returned. Also, the bank has provided loans to certain companies and these loans are hardly ever recovered. Even so, these loans are not marked up as default loans.

According to the bank’s records, in 2009 the banks default loans totaled Tk 3.88 billion (Tk 388 crore). In December last year this stood at Tk 123.68 billion (Tk 12,368 crore). Loans disbursed by the bank in December totaled Tk 427.7 billion (Tk 42,770 crore).

While delivering a lecture on Thursday, former governor of Bangladesh Bank Mohammed Farashuddin made reference to the Sikder family, saying, “A bank was given to the founder of Jagannath College Chhatra League. His son attempted to shoot dead an MD of a bank in public. There is no account of how much money they have taken abroad. It is to be decided whether they will be punished while merging the bank or keeping it separate. A merger is a good decision, but it may also give rise to a fresh crisis.”

Even while steeped in a crisis, National Bank in 2021 exempted seven clients from interest amounting to Tk 22 billion (Tk 2,200 crore). Within just a matter of a single day, Bangladesh Bank gave its nod to writing off this huge volume of interest, with certain conditions attached. This interest had been imposed over the previous 10 years. All seven companies were of Chattogram. These seven companies had been provided with the loans since 2003 from the National Bank Khatunganj branch in Chattogram and the Gulshan Branch in Dhaka.

From various documents of Bangladesh Bank and National Bank it has been learnt that the interests that were written off had been imposed from 2010. National Bank had shown the interest as part of its income. The bank paid the government taxes from the profit against its income, and also paid the shareholders profits. After that the interest was exempted. Now this interest exemption will have to be deducted from the income every year.

The officials say that this is also one of the main reasons that the bank has seen losses over the past two years. In 2022 the bank's losses were Tk 32.85 billion (Tk 3,285 crore). In 2023 this losses were Tk 14.97 billion (Tk 1497 crore). Prior to that, the bank had been making profits. In 2018 the bank made a net profit of Tk 4.1 billion (Tk 410 crore taka), in 2019 the net profit was Tk 4.16 billion (Tk 416 crore), in 2020 the profit was Tk 3.48 billion (Tk 348 crore) and in 2021 the net profit was Tk 190 million (Tk 19 crore).

According to the bank’s records till December last year, that half of the Tk 420 billion (Tk 42,000 crore) disbursed by the bank as loans, were limited to 20 groups. They were sort of regulators of the bank. Some of them were defaulters, then took a court stay to remain on the list of good borrowers. This gives the bank scope to show a lower default rate. The debt status of the late Awami League member of parliament Aslamul Huq’s Maisha Group is Tk 27.55 billion (Tk 2,755 crore) on which the court has put a stay order.

The debt status of various companies of Basundhara Group is Tk 36.12 billion (Tk 3,612 crore), Beximco LPG and Beximco Group’s debt status is Tk 21.17 billion (Tk 2,117 crore), Chattogram’s Md Yasin Chowdhury’s FMC Group’s debt status is Tk 16.1 billion (Tk 1,610 crore), Saif Port Holding and Saif Powertech Tk 11.14 billion (Tk 1,414 crore), Fu Wang Food and SS Steel Tk 6.98 billion (Tk 698 crore) and Karnaphuli Group Tk 6.75 billion (Tk 675 crore).

Meanwhile, the list of the bank’s default borrowers reveals that Tk 84.39 billion (Tk 8,439 crore) is stuck with the top 20 defaulters. This includes Bloom Success International’s default loan of Tk 8.36 billion (Tk 836 crore), Broadway Real Estate’s Tk 6.68 billion (Tk 668 crore), Nur Jehan Group’s Tk 5.96 billion (Tk 596 crore), Daiking Smart Battery’s Tk 5.31 billion (Tk 531 crore), and Ehsan Group’s default loan of Tk 6.19 billion (Tk 619 crore). Also, the default loan of Millennium Group stands at Tk 5.17 billion (Tk 547 crore), Opex Sinha Group Tk 5.31 billion (Tk 531 crore), Marium Construction Tk 4.79 billion (Tk 479 crore), RSA Capital Tk 4.31 billion (Tk 431 crore), Keya Cosmetics Tk 3.76 billion (Tk 376 crore), Independent TV 3.33 billion (Tk 333 crore) and GMG Airlines Tk 2.38 billion (Tk 238 crore).

The former bankers are displeased with this present state of National Bank. Former chairman of the Association of Bankers Bangladesh (ABB), Mohammad Nurul Amin, told Prothom Alo, “The institution was destroyed in front of everyone’s eyes, but no one did anything. Loans were provided by the bank without following the rules and regulations and all other decisions too were taken at the behest of the board. The law was not heeded. The bank had a huge lack of good governance.”

Mohammad Nurul Amin went on to say that the bank had all elements required to make it a bad institution. It was only natural for it to turn bad. Till now, those responsible for this situation have not been held accountable. If those responsible for this predicament are not brought to book, if they are not accountable, this will have an adverse impact on other good institutions too.