Defaulted loans: Janata Bank tops the list

Once known as one of the best banks in the country, the state-owned Janata Bank Limited was the main source of financing entrepreneurs. Many successful entrepreneurs once funded by Janata Bank later became industrialists, yet this bank has now topped the list of defaulted loans.

Records of Janata Bank show defaulted loans have doubled banks in just three months, topping the list of defaulted loans in the banking sector. As of March this year, defaulted loans stood at Tk 169.50 billion, which rose to Tk 286.65 billion in June, while 16.15 per cent of total disbursed loans was defaulted loans, which increased to 30.43 per cent in now, and a big portion of defaulted loans were released through following irregularities.

Janata Bank distributed 42 per cent or Tk 400 billion of total defaulted loans to three influential industrial groups. The bank disbursed Tk 942.07 billion in loans as of June. As the bank’s performance started decreasing over a decade ago, renowned business groups left the banks while many controversial and anonymous business groups replaced them.

Meanwhile, large-scale loan irregularities and scams also hit Janata Bank, resulting in the rise of defaulted loans, and such loans are not being recovered even after being rescheduled repeatedly. The entire banking sector has 10 per cent of overall defaulted loans while Janata Bank has three times more than that. Three big businesses amassed a big portion of loans, the bank on the other hand tops the list of defaulted loans – the state-owned bank altogether is experiencing a major crisis.

Recently, the International Monetary Fund (IMF) approved USD 4.5 billion in loans for Bangladesh, but the lending agency gave a condition on reducing defaulted loans to 10 per cent. After that, Bangladesh Bank ordered Janata Bank to cut defaulted loans to 10 per cent. Besides, Bangladesh Bank officials have been monitoring and coordinating with Janata Bank for over a decade, yet the financial condition of the bank is not improving. Instead, Janata Bank continued to provide loans and other facilities to several groups, and Bangladesh Bank, too, is approving those under special consideration. Amid this circumstance, Janata Bank is borrowing an average of Tk 20 billion every day to run its daily operation.

Janata Bank is not repaying the US dollars that the bank borrowed from the Export Development Fund (EDF) established with foreign exchange reserve funds. As a result, the EFD facility for its clients also stopped.

Abdul Jabbar joined as the managing director of Janata Bank in May this year. He told Prothom Alo, “As clients are not paying instalments, many loans turned defaulted. Now, any client’s loons will be regularized within the rules and regulations of Bangladesh Bank. We do not want to make the banks’ financial health better in just papers; what the actual scenario will be shown, and we are trying our best to recover defaulted loans.”

As of end-2021, deposits of Janata Bank stood at about Tk 1.02 trillion and loans at Tk 699.65 billion. Deposits rose by Tk 63.06 billion to about Tk 1.08 trillion and loans by Tk 282.42 billion to Tk 942.07 billion as of June this year. That means loans increased by four times more than deposits during this period. Janata Bank also joined several syndicated loans and provided fresh loans to big clients over the past one and a half years.

Janata Bank records show Beximco Group is the biggest client of the bank, followed by S Alam Group and Orion Group. These three business groups owe the Tk 400 billion. The bank’s lending to all of these three clients exceeded the lending ceiling set for a single client, and in these cases, Bangladesh Bank gave special approval. The local branch of Janata Bank in the capital’s Motijheel lent Beximco Group Tk 220 billion in loans out of its total Tk 310 billion loans. Orion Group, AnonTex Group and Thermax Group received a large portion of loans disbursed by the Janata Bhaban corporate branch while S Alam Group got almost all loans from the bank’s Sadharan Bima Bhaban corporate branch in Chattogram.

A liquidity crisis has hit the bank following the disbursement of new loans and a slow rise in deposits. The bank is not getting back its deposits from several banks and financial institutions either. As a result, Janata Bank is borrowing money daily to run its regular operation. In fact, the bank is borrowing the money to pay the import liability of the government.

For this reason, Janata Bank’s board of directors has decided not to increase the lending amount to their big clients who borrow more than the lending ceiling under special consideration, and these clients will receive fresh loans as much as the amount they repay.

Mustafa K Mujeri, the former chief economist of Bangladesh Bank, told Prothom Alo, “Not only has the Janata Bank, the entire banking sector become hostage to big influential clients and they are involved in the state mechanism. Such a situation arises due to discipline in the banking sector. Defaulted loans rose to this high at this state-owned bank because of disbursing loans without following rules. Besides, the policy of Bangladesh Bank is also liberal for loan defaulters, which is why many people did not repay loans willingly. The government is also providing various assistance to these banks. As a result, deposits of people are at risk. It is not possible to improve the economy of the country with this banking sector.”

Defaulted loans stood at Tk 123.19 billion in Janata Bank at the end of 2021, which increased to Tk 286.65 billion in June. That means the bank’s defaulted loans rose by more than double, resulting in a big capital shortfall. The bank’s capital shortfall increased to Tk 21.89 billion in June this year from 17.37 at end-2022.

Janata's total provision against bad loans climbed to Tk 138.54 billion at end-2022, but the bank could maintain a provision of Tk 53.51 billion. So, Bangladesh Bank gave the bank until 2031 to maintain the remaining provision of Tk 85.03 billion.

Regarding this, Bangladesh Bank executive director and spokesperson Mezbaul Haque told Prothom Alo, “The coordinator appointed by Bangladesh Bank is working to improve the financial condition of Janata Bank. It is not possible to say anything about the past irregularities and loans. Not all loan proposals came to the board. If the bank's management authorities do not stop, it will not be possible to guard all the time to keep the bank on the line. Defaulted loans rose as inspectors of Bangladesh Bank also approved several defaulted loans. The Janata Bank has been instructed to bring down its defaulted loans to 10 per cent.”

According to the June-based report of the bank, it owes a total of Tk 17.46 billion to three companies of the Crescent Group. These three organisations are Rupali Composite, Crescent Leather and Crescent Tannery. MA Quader is the chief of these companies.

Apart from that, the bank owes Tk 10.77 billion to Rimex Footwear Ltd, owned by Quader’s brother Abdul Aziz. He is a film producer and the owner of Jaaz Multimedia.

Janata Bank owes Tk 12.27 billion to three companies under the Ratanpur Group. These are – Ratanpur Ship Recycling, SM Steel Re-rolling Mills and Modern Steel Mills. Maqsudur Rahman of Noakhali is the chairman of this group. He is the former director of South Bangla Agriculture and Commerce Bank.

The amount of defaulted loan of Chowdhury Knitwear and Chowdhury Towels is Tk 6.25 billion. Bismillah Group owner Khwaja Soleman Anwar, who has been absconding in another case, is the head of these companies.

Hotel Holiday Inn owes Tk 5.95 billion to Janata Bank. Bangladesh Krishak League’s central committee advisor Alam Ahmed is the owner of this hotel. Apart from this, Thermax Group owes the Janata Bank Tk 5.69 billion, NPK Fertilisers owes Tk 5.52 billion, MH Golden Boot and Shainich Knit of the AnonTex Group owes Tk 4.67 billion, and three companies under the Ibrahim Group owe Tk 4.22 billion,Delta Composite Knit owes Tk 3.73 billion, Litun Fabrics owes Tk 2.97 billion, two companies under the Asif Group owe Tk 279 billion, three companies under the Lockpur Group owe Tk 2.62 billion, Hansel Paper Mills owes Tk 2.65 billion, MBA Garments owes Tk 1.68 billion, Afil Jute Mills owes Tk 1.63 billion, Mac International owes Tk 1.62 billion, Shahnewaz Group owes Tk 1.58 billion, Landmark Fabrics owes Tk 1.58 billion and Align Apparels owes Tk 1.46 billion to Janata Bank.

In all, the bank's top 20 loan defaulters owe the bank a total of Tk 97.19 billion. On the contrary the bank has realised only Tk 320 million from these clients so far this year. The amount was only Tk 910 million last year.

Mustafa K Mujeri, said, “Economic development is not possible with the way the existing banking system is running.”