State-run Janata Bank has now been grappling with a liquidity crisis and borrowing around Tk 80 billion daily to remain afloat.
The bank also saw a remarkable rise in its defaulted loans last year.
But the poor financial health could not deter the bank from waiving a loan interest of Tk 33.59 billion in favour of the AnonTex Group.
Its board of directors took the decision in December last year, on the condition that the loan will remain regular until 31 March and AnonTex will repay Tk 48.2 billion by June. The Janata Bank will mark the loan as defaulted if the group fails to fulfill the condition.
There is a similar precedent in the banking sector as the National Bank had earlier waived a loan interest of Tk 21.99 billion in favour of a Chattogram-based conglomerate. The private bank then invited an acute liquidity crisis through the concession.
AnonTex Group topped the list of defaulters presented before the parliament in 2020. Its owner Md Younus alias Badal took a total of Tk 50 billion from Janata Bank using some 18 companies he owns. The amount rose to Tk 81.79 billion with interest.
Some Janata Bank officials allegedly colluded with the errant business group and helped it get the loan granted irrespective of rules and regulations. Some of the unscrupulous officials have already retired from their job while the remaining ones are now holding top positions, including managing directorship.
There have been many discussions over the AnonTex Group, but none of the officials are held accountable for the loan irregularities till the date.
Why the sudden interest waiver?
Speaking to different levels of Janata Bank, it was learnt that a process is underway to settle loan liabilities of the AnonTex Group with only the principal. It will push the unscrupulous officials out of the scene, help the beneficiaries remain untouched, and hush up all the irregularities.
On the flip side, the Janata Bank provided the loans from the public deposits and paid interests to the depositors on a regular basis. There is a fear that the interest waiver would eventually lead to an imbalance in liquidity management in the bank.
It is now the most talked about loan scam in the country’s banking sector, after Hallmark and Basic Bank scams. It is also known as the largest single-party loan scam.
According to different documents, the AnonTex companies frequently opened letters of credit (LC) in the Janata Bank to import raw materials, but did not settle the LC liabilities. Later, the bank took it upon itself and paid the overseas exporters the import bills.
Thus, the liabilities of the non-funded credit facility were converted into funded loans. The companies also refrained from repaying the amounts taken as cash credit (CC) or working capital. But, All these issues failed to hold back the Janata Bank from sanctioning fresh loans for the AnonTex companies.
The process
The National Bank had waived a loan interest of Tk 21.99 billion in favour of seven entities of a Chattogram-based group in 2021. Later, the seven companies repaid Tk 49.28 billion and got all liabilities cleared. The Bangladesh Bank then cleared the way for interest waiver citing various conditions.
The seven companies received the loans from the bank’s Gulshan branch in Dhaka and Khatunganj branch in Chattogoram in phases since 2003. The waived interest was charged in 10 years.
It was learnt that AnonTex Group contacted the Chattogram-based group for help in getting out of the loan liabilities. The Chattogram-based group, which owns several banks, assured it of waiving the interests in exchange of acquiring all AnonTex entities.
Senior officials of Janata Bank also extended consent to the settlement and it was followed by the board of directors’ decision on the interest waiver.
But the plan hit a snag as Islami Bank and some other Shariah-based banks faced a liquidity crunch in the meantime. Now, questions arose over the execution of the interest waiver.
An official of the Chattogram-based group said the decision to acquire the AnonTex companies may take effect once the Islami Bank recovers from the cash crunch.
Md Younus of AnonTex Group did not receive the call when he was contacted over the phone for his comment in this regard.
Statement of Janata Bank chair
The amount, owed by 18 companies of AnonTex Group to Janata Bank, totals at Tk 81.79 billion. Of them, the corporate branch in Janata Bank headquarters sanctioned loans to 16 companies while local branches provided loans to the remaining two companies.
However, the bank has 22 clients in total from AnonTex Group.
The loans were sanctioned when the current managing director, Abdus Salam Azad, was manager of the headquarters’ corporate branch. He has been serving as managing director since 2017.
The MD could not be reached as he is now in Italy.
Its chairman SM Mahfuzur Rahman, however, defended the interest waiver and said the long defaulted loan is apparently damaging the bank’s financial health. “This is why, when the proposal came for an exit with payment of principal, the board approved it as per rules.”
He also said the board did not bother about how the group will repay the loans and whom it will sell companies. Hence, there was no scope to learn about the issue.
The decision will be annulled if the loans are not paid in time, he said, adding a further decision would be taken as per the situation.
The Janata Bank chair also explained that the decision on interest waiver has been taken subject to collection of sanctioned funds. Many clients earlier availed of this facility complying with the central bank rules and it will remain in place for future.
Financial health
The Janata Bank had a deposit base of Tk 1016.2 billion in 2021 and it fell down to 1014.6 billion after 2022. But the amount of disbursed loans increased from Tk 699.65 billion in 2021 to 852.06 billion in 2022.
Also, the bank registered a significant fall in investment from Tk 198.8 billion to Tk 123.19 billion.
On the flip side, its defaulted loan rose from Tk 123.19 billion to 145.04 billion while the capital deficit jumped from Tk 7.23 billion to Tk 14.99 billion.
Salehuddin Ahmed, former governor of Bangladesh Bank, said the interest can be waived off if there is a logical ground. But those who have financed this group beyond the regulations should be held accountable. They should be held even if they retire.
He also said it will not be right to spare the people who mismanage the public deposits. It will shrink the clients’ confidence.