Just four days before the Awami League government toppled from power, Bangladesh Bank extended privileges to the Basundhara Group, one of the top business houses of the country, so that it would not have to repay its defaulted loans in two years.
The group got this privilege for its loans taken from the private sector National Bank.
According to sources in Bangladesh Bank, Basundhara's loans with National Bank stand at Tk 38.59 billion (Tk 3 thousand 859 crore), of which Tk 38.44 billion (Tk 3 thousand 844 crore) is direct loan.
This direct loan provided to the business group is 8 times higher than the loan ceiling applicable to them according to the loan-related laws. Special privileges were provided to the Basundhara Group while rescheduling their default loans, the second instance of rescheduling defaulted loans.
Concerned officials of the central bank say that during the movement of the Students against Discrimination, a letter in this regard was sent to the National Bank on 31 July at the insistence of the governor at the time, Abdur Rouf Talukder. Earlier Bangladesh Bank had given its approval to the National Bank proposal. On 5 August the government of Sheikh Hasina fell in the face of the student-people's movement.
In the letter sent to National Bank, the central bank said, "This approval cannot be used as a precedence for any other clients of the bank or for any clients of others banks regarding rescheduling of loans."
And so the bank officials describe that privilege provided to Basundhara Group as rare.
When two senior officials of Basundhara Group were contacted about this matter, they refused to make any comment.
National Bank has been steeped in all sorts of problems for long. According to officials of the bank, they are facing an extreme liquidity crisis, not having been able to recover loans.
Their normal banking activities have slowed to a near standstill. Even cheque clearance has been held up as the bank has deficit in its current account with Bangladesh Bank.
Many of the branch managers remain absent from office. At the end of June the bank's loans stood at Tk 427.39 billion (Tk 42 thousand 737 crore). Of this, the non-performing loans stand at Tk 209.29 billion (Tk 20 thousand 929 crore), that is, 40 per cent of the total loans.
Amount of loans
The Bank Company Act determines how much a business group can borrow from a bank and to what credit facilities it is entitled. It states that a group can directly borrow from any bank an amount equalling 15 per cent of its paid up capital and 10 per cent for credit facilities, such as letter of credit, guarantee, etc. Accordingly, National Bank can provide Basundhara Group with direct loan of Tk 4.82 billion (Tk 482 crore) and credit facilities of Tk 3.21 billion (Tk 321 crore).
National Bank sources say on 31 August the direct loans of Basundhara Group from National Bank increased to at Tk 38.44 billion (Tk 3 thousand 844 crore). And credit facilities were only Tk 150 million (Tk 15 crore) (non-funded). In all, the bank provided the group with loans around 8 times higher than the ceiling. Even Bangladesh Bank at various times gave its approval to provide these massive loans to Basundhara in violation of the law. The bank is now in dire straits because of these loans.
According to National Bank's records of 31 August, the loans of Basundhara Paper Mills and Basundhara Multi Paper stood at Tk 8.1 billion (Tk 810 crore). The loans of Meghna Cement Mills, Basundhara Industrial Complex and Basundhara Infrastructure were Tk 1.8 billion (Tk 180 crore). The other loans taken by the group include Basundhara Food and Beverage Tk 1.9 billion (Tk 190 crore), Basundhara Multi Food Tk 9.64 billion (Tk 964 crore), Basundhara Multi Trading Tk 1.56 billion (Tk 156 crore) and Basundhara Airways Tk 340 million (Tk 34 crore).
There were also loans of Basundhara Oil and Gas Company amounting to Tk 6.79 billion (Tk 679 crore) and Basundhara Import Export Company Tk 8.44 billion (Tk 844 crore). Of this, Basundhara Multi Food's credit facilities were Tk 140 million (Tk 14 crore). According to the records, 28 installments of 7 of these companies are overdue.
The group sought a two-year suspension of loan repayment in its application for loan rescheduling. The board gave its approval. Bangladesh Bank also approved. But now due to the liquidity crisis this has been switched to one yearMd Touhidul Alam Khan, director, National Bank
How the facilities were provided
Several companies of the Basundhara Group fell into default at the start of the current year. They applied to National Bank in April for a rescheduling of their loans. In the application, the group asked for a second rescheduling for 7 years and a two-year suspension on repayment of loans and installments.
The groups asked for these facilities in the light of the policy drawn up by the central bank in 2022 regarding repayment of default loans. The policy was drawn up for those affected by the Covid pandemic and the Russia-Ukraine war. It was stated that under this policy, there was no need for the central bank's approval to provide these facilities. But the ceiling to suspend loan repayment was one year at the most.
In June the National Bank board approved of Basundhara's application. However, as the policy did not provide facilities for a two-year suspension of repayment, on 30 June National Bank sought the central Bank's approval in this regard.
The central bank had taken up a policy that it would not give approval of any loan rescheduling. So National Bank's application was pushed to one side. Then, according to sources, in the last week of July the governor of Bangladesh Bank Abdur Rouf Talukder deviated from that rule and gave a thumbs-up to rescheduling the Basundhara Group's loan.
In Bangladesh Bank's letter sent on 31 July to National Bank, it was said that in the case of rescheduling Basundhara Group's loans, conditions other than the one-year ceiling fixed in the year 2022 for loan rescheduling, would be applied. The bank board at its own discretion can take a decision to allow the repayment time to be extended to two years. Based on this letter, National Bank announced its decision to provide the group with this concession.
After the fall of the Awami League government, on 20 August Bangladesh Bank dissolved the National Bank board of directors. For so long the bank's control had been in the hands of S Alam Group. Former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) and BNP vice chairman Abdul Awal Mintoo has been made chairman of National Bank's new board. After that the bank changed the facilities provided to Basundhara.
Speaking about the privileges provided to Basundhara Group, director of National Bank, Md Touhidul Alam Khan, told Prothom Alo, "The group sought a two-year suspension of loan repayment in its application for loan rescheduling. The board gave its approval. Bangladesh Bank also approved. But now due to the liquidity crisis this has been switched to one year. A condition has also been imposed for the interest on the loan to be paid every month."
When asked what steps were being taken to overcome the liquidity crisis, Md Touhidul Alam Khan said, "We are endeavouring to resolve the liquidity crisis by introducing new deposit products. Loan recovery efforts are also being stepped up. Efforts are also being made to get liquidity support from other banks and Bangladesh Bank."