Loan irregularities unabated in December despite November mishap

Despite being at the center of discussion for loan irregularities in November, Islami Bank has stubbornly continued the trend as it later disbursed over Tk 30 billion in loan from three branches in Chattogram disobeying the lending rules. 

The loans went to three Chattogram-based companies – Century Food Products Limited, United Super Traders, and M/s Murad Enterprise. To sanction the loans, the bank defied the fact that it is dealing with a liquidity crunch and having to borrow money from the central bank as well as other commercial ones. 

Bangladesh Bank, the banking sector regulator, appointed an observer in the largest private sector bank on 11 December in an effort to rein in the rampant irregularities. The observer has been looking into the disbursal of  a Tk 100 million loan, collection and current balance of the bank since 15 December.

The new loan irregularities were tracked down in the central bank inspection. Later, the regulator instructed the Islami Bank’s managing director (MD) to take administrative action against the loan recommender, approver and other officials who failed to ensure proper utilisation of the loan facility. 

Islami Bank MD Monirul Moula told Prothom Alo on Saturday night that the loans, as far as he could recall, were sanctioned long ago. No new loans were approved in the previous month. 

“The tenure of these (previously approved) loans has been renewed. It has been done at the lower level,” he said, adding that he could not recall any disciplinary action in this regard. 

Asked whether some mid-level officials are taking decisions on such loans, Monirul Moula said he takes all decisions as the managing director. The executive committee and board also play a role if necessary. 

According to the loan documents, M/s Murad Enterprise received Tk 2.4 billion in loan from the Islami Bank’s Chaktai branch on 6 December, Tk 1.1 billion on 7 December, Tk 1.3 billion on 11 December, Tk 1.2 billion on 12 December, Tk 1.3 billion on 13 December, Tk 1.2 billion on 14 December, and Tk 1.18 billion on 15 December. The amount stood at Tk 10.54 billion in total, with interest. 

The bank's Jubilee Road branch lent Tk 9.59 billion to United Super Traders in 11 days from 18 December to 29 December. The loan was totaled at Tk 10.84 billion with the interest.

Meanwhile, the Khatunganj branch disbursed Tk 11.19 billion in total to Century Food Products Limited. The client received Tk 5.74 billion during the previous year's January-October period while the remaining amount was cleared in December. 

The central bank, however, said Islami Bank did not follow the due process while clearing the loans. 

Bangladesh Bank, in a letter to the Islami Bank MD recently, mentioned that the bank now owes Tk 32.57 billion in total to the three Chattogram-based companies. The regulator asked to realise the loan immediately as its tenure expired. Otherwise, it must be shown as defaulted. 

Also, the central bank ordered administrative action against all officials who recommended the loan, approved it, and later failed to ensure proper use of the facility. 

The regulator issued the directives after reviewing the documents of the bank’s executive committee meeting where the loans were approved. Selim Uddin, Chittagong University professor and Bangladesh House Building Finance Corporation chairman, is now the chairman of Islami Bank’s executive committee. 

Some 16 out of 20 members of the bank's board of directors are associated with its owning entities. Out of these 16 members, 12 are directors nominated by different companies of the owner group. The remaining 4 members include representatives of foreign and government institutions.