The state-owned Bangladesh Development Bank Limited (BDBL) PLC is a classic example of the decision to merge banks or financial institutions in an unplanned way. The BDBL was launched on 3 January 2030 after the merger of two crisis-hit state-owned financial institutions – the Bangladesh Shilpa Bank (BSB) and the Bangladesh Shilpa Rin Sangstha (BSRS).
Following the merger, BSB and BSRS got a new name and started operating like a commercial bank, but their newly disbursed loans have turned into defaulted loans along with the burden of old ones. As a result, BDBL could not succeed commercially and is still struggling. There has been no improvement even after Bangladesh Bank appointed observers. Instead of a banking business, BDBL survives merely on the income from stock markets and building rent instead of banking.
Several officials at BDBL told Prothom Alo on condition of anonymity the bank mainly fell into this crisis because of its ‘aggressive banking’ policy after it began functioning like a commercial bank, causing 42 per cent of its total lending. As of the end of December 2023, the loan outstanding of BDBL stood at Tk 23.13 billion including Tk 9.82 billion in defaulted loans.
Several factors contributed to such a dire state at the BDBL, according to the bank’s managing director Habibur Rahman Gazi. He told Prothom Alo, “Since it had no prior experience in commercial banking, BDBL made big mistakes immediately after the merger happened. Other banks lent to bad clients, and that is still affecting BDBL. There is no branch at important locations despite being a commercial bank. The size of the bank did not expand either. There is a big investment in the capital market that has become volatile. As a result, the financial condition becomes worse. We, however, are trying to do better by opening new branching to increase deposits.”
Financial condition of BDBL
The amount of deposits at the bank stood at Tk 28.31 billion in 2018, which dropped to Tk 24.21 billion in 2020. Deposits increased to Tk 29 billion in 2021, Tk 29.14 billion in 2022 and Tk 30 billion in 2023.
The loan outstanding stood at Tk 19.30 in 2018, which rose to Tk 21.29 billion in 2020, Tk 28.13 in 2021 and Tk 24.79 billion in 2022. The loan outstanding, however, fell slightly to Tk 23.13 billion.
The amount of defaulted loans stood at Tk 8.89 billion, which was 46 per cent of total loans. Defaulted loans rose to Tk 9.82 billion or 42 per cent of total loans in 2023. BDBL has tried to overcome such a dire state, but could not make it. There were 44 branches of the bank in 2018, which has increased to 50 now.
Sources said BDBL earned Tk 390 million in net interest, Tk 750 billion from capital markets and about Tk 200 million from building rents in 2022. The banks owns several multi-storied buildings in Dhaka’s Motijheel and Karwan Bazar, Chattogram and Khulna, as well as a total of 27 bighas of land in Dhaka, Chattogram, Khulna, Jhenaidah and Rajshahi. BDBL has two subsidiaries -- BDBL Investment Services Limited (BISL) and BDBL Securities Limited – to trade in stock markets.
Burden of BDBL
The BDBL owns Tk 6 billion out of a total of Tk 9.82 billion of defaulted loans to the top 20 loan defaulters, and 2-3 of those top defaulters were from the pre-merger period while the remaining defaulters received loans after the merger. Now the bank cannot recover the loan. Zillur Rahman joined as managing director after the BDBL started its journey. He had been an officer for five years and most of these loans were disbursed during his term.
According to the bank's annual report, borrowers from 2012 have now become top defaulters. BDBL owns TK 1.1 billion to MM Vegetable Oil, a subsidiary of Chattogram-based Mostafa Group, in defaulted loans, Tk 690 million to Tallu Spinning, Tk 650 million to RR Spinning and Cotton Mills, Tk 470 million to Delta Spinners and BR Spinning, Tk 380 million to Media International and Tk 300 million to Sonagon Textiles.
BDBL managing director Habibur Rahman Gazi told Prothom Alo, “Several top loan defaulters have already paid back some money, and we hope these loan payments will be regular, thus the amount of defaulted loans will drop.”
This report appeared in the print and online editions of Prothom Alo and has been rewritten in English by Hasanul Banna