Rupali Bank caught in a trap

State-owned Rupali Bank Limited bears the burden of lending without proper scrutiny and investing in weak finance instituting loans following its failure to recover the growing defaulted loans. As of June-July, bad loans mounted to Tk 17.76 billion, which is 18 per cent of the bank’s total loans.

On the other hand, Rupali Bank was lending to big businesses aggressively but failed to recover loans on time while the bank is providing the depositors more interest than it earns, resulting in losses of its earnings from interest. So, the bank is providing officials and employees’ salaries, as well as maintaining other expenditures from its earnings from other investments and services outside the lending. In 2022, Rupali Bank enjoyed the central banks’ rules on loan relaxation and posted Tk 210 million in profits. However, Rupali Bank, the lone state-owned bank listed in the stock market, announced no dividend for its shareholders at capital markets and 7 per cent of its total shares are listed in stock markets.

An initiative to privatise Rupali Bank was undertaken in 2005 following the bank modernisation project of the World Bank, followed by a roadshow at various countries by the Privatisation Commission in the next year. At that time, a Saudi investor proposed to buy Rupali Bank, but it did not go far. Now, the bank is struggling with several big clients as well as big amounts of defaulted loans. As the bank has been caught in a trap, it can neither come out of it nor take any effective plan to expand its business.

Mohammad Jahangir joined as the managing director of the bank a year ago. He told Prothom Alo on Saturday, “The highest amount of bad loans have been recovered during my tenure, and the bank lent to no big business group either. SMS and agriculture loans, however, continue. We are trying to recover loans from big businesses regularly, but we cannot deny the old problems, but we are trying so that no further problem arises.”  

Deposits at Rupali Bank increased to Tk 606.02 billion in June 2023 from Tk 472.77 billion in 2020 while the amount of loans rose to Tk 458.60 billion from Tk 319.50 billion during this period. Deposits increased by Tk 193.25 billion and loans by Tk 139.10 billion in these three years. Currently, the bank stopped lending aggressively, but the amount of defaulted loans doubled in the past three years rising to 82.44 billion in June 2023 from Tk 41.67 billion in June 2020.

As the bank’s provision shortfall widened against its loans and other investments, Rupali Bank took additional time from the central bank.  The Bangladesh Bank instructed the bank to keep Tk 81.80 billion in provision to finalise its annual financial statement, instead, Rupali Bank managed to maintain Tk 21.33 billion, and the central bank allowed Rupali Bank to add the remaining Tk 60.84 billion in provision within 2023. As a result, the bank managed to make Tk 210 million in profits.

Speaking to Prothom Alo about what the bank should do amid such circumstances, Md Obayed Ullah Al Masud, who served as the managing director of Sonali Bank and Rupali Bank, said, “I did not lend money to any big business during my tenure and big lending must be stopped to save the bank. Banks must go for lending to SME and agriculture sectors entirely and find new clients. Thus, it will rebound the country’s economy. Loans will be provided through NGOs or forming consortiums, if necessary.”

Data from Rupali Bank show, as of June, Chattogram-based Nurjahan Group, which is involved in the commodity business, topped the list of loan defaulters as four companies of this group owe Tk 6.29 billion in defaulted loans to the bank. Benetex Industries, which comes in second places, owes Tk 3.67 billion to Rupali Bank, AA Knit Spin Limited ( Tk 2.82 billion), Virgo Media (Chaneel 9) (Tk 2.42 billion), HR Spinning Mill (Tk 1.99 billion), Ibrahim Consortium (Tk 1.92 billion), Chattogram SA Group (1.90 billion), M Rahman Steel (Tk 1.88 billion), Jaz Spinning (Tk 1.84 billion),  Panna Textile (1.73 billion), HZ Agro (1.67 billion),  Himalaya Paper and Board (Tk 1.65 billion), Western Engineering (Tk 1.64 billion) and Chowdhury Leather owes Tk 1.61 billion in defauted loans to Rupali Bank.

Besides, Shafiq Steel, Mabia Ship Breakers, Water Heaven Corporation, Crystal Steel and Ship, Beautiful Jacket and Dhaka Textile Limited also made to the list of top 20 loan defaulters, who altogether owe Tk 41.98 billion to Rupali Bank.

The state-owned bank recovered Tk 650 million only in the first six months of 2023 with AA Knit Spin Limited alone returning Tk 390 million and Panna Textile paying Tl 130 million.

Among other loan defaulters are MB Spinning, Nasrin Zaman Knitting, Japan Bangladesh Securities, Price Club General Trading, ABS Garments, Dream Knitting, Desh Jewellers, Z&Z International and Capital Assets Production Limited. Of these companies, Japan Bangladesh Securities, owned by casino scam mastermind Selim Pradhan, and Desh Jewellers, owned by Anwar Hossain aka Gold Anwar from Feni, together owe Tk 1.80 billion to Rupali Bank.

The local office of Rupali Bank is on the ground floor of the bank’s headquarters in Motijheel, Dhaka. As of December 2022, the local office disbursed Tk 147.04 billion in loans, which was 33 per cent of the bank’s total loans while the Motijheel corporate branch lent Tk 21.12 or 4.85 per cent, the Rupali Sadan corporate branch Tk 13.42 billion or 3.08 per cent, the Daulatpur branch Tk 24.52 billion or 5.63 per cent and the Ramna corporate branch in the capital lent Tk 9.08 billion, which was 2.09 per cent of the bank’s total lending.

According to the bank’s annual report, Mother Textile Mills was the bank’s biggest client at the end of 2022 as the company owes Tk 12.70 billion to the bank, followed by Beximco Limited (Tk 9.95 billion), Crony Apparels (Tk 8.40 billion), SSA Textiles (Tk 7.06 billion)  and Jute Textile Mill (Tk 6.78 billion).  Other big clients include Badar Spinning, Abanti Colour Tex, Eco Cotton Mills, Uttara Pat Sangstha, Dabiruddin Spinning, Green Planet Resort, Dhaka Trading House, Noman Spinning and Saad Musa Textile, and these companies altogether owe Tk 125.50 billion in loans to Rupali Bank, which is 27 per cent of the bank’s total loans.

Dolly Construction, a contractor and construction firm, owed Tk 5.70 billion in loans to Rupali Bank at the end of 2022, and all of it was defaulted loans. Several states banks including Rupali Bank financed this firm under the pressure from an influencial member of the cabinet. Now, the Anti-Corruption Commission filed a case aganist eight people including five senior officiala of Rupali Bank and two of Dolly Construction on allegation of embezzling Tk 4.89 billion.

According to the case statement, the accused took Tk 7.52 billion in loans from the Motijheel corporate branch using fake documents and repaid Tk 3.08 billion with interest in various times, but they did not pay the remaining Tk 4.89 billion with interests and embezzled it.

Those who have been named in the case are Dolly Construction Limited managing director Mohammad Nasir Uddin, his wife and chairman of the company Dolly Akter, former deputy general manager Khaled Hossain Mollik and former assistant general manager Md Solaiman of of Rupali Bank's head office, senior principal officer Md Golam Sarwar and assistant general manager Mohammad Kamruzzaman of local office, deputy general manager of Paltan branch ( former assistant general manager of Motijheel corporate branch) ASM Morshed Ali and owner of Geograph Survey Corporation Md Pervez Bin Kamal.

Officials at Rupali Bank said other officials who were involved in sanctioning these loans are also passing days in fear, resulting in disruption in the regular operation of the bank.

Regarding this, South Asian Network on Economic Modelling (SANEM) executive director Selim Raihan told Prothom Alo the main clients of the state-owned banks are the influential individuals and companies instead of good business companies, and that is the problem for these banks. Besides, those who are defaulted are also influential, and both the finance ministry and the Bangladesh Bank exert control over these banks. So, banks have to keep them happy. Steps must be taken to increase capacity of theses banks and the central bank must be bestowed with sole authority over banks. Merit must get priority to consider clients and management leadership so that no new incident occurs. Banks must emerge out of old problems taking special initiative, or else problems will rise further, he added.

This report appeared in the print and online editions of Prothom Alo and has been rewritten in English by Hasanul Banna