National Bank banned from disbursing loans: BB
In the wake of huge irregularities, Bangladesh Bank has imposed a ban on the National Bank in disbursing loans in bid to stop anonymous loans.
As a result the first generation private lender will not be able to lend money at present.
Moreover, the approval of the central bank has been made mandatory in recruiting senior officials at the bank. Besides, supervision has to be strengthened in recovering loans from the top customers.
Bangladesh Bank gave these instructions in a letter to the National Bank on 3 May.
With the latest move, the central bank has been trying to bring the private banks under regulations. The central never became such active over the NBL any time before.
Earlier, Bangladesh Bank took similar initiatives on the BASIC Bank and the Farmers Bank (now Padma Bank) at the last moment. However, these two banks couldn’t be saved from collapsing.
Managing director of NBL Shah Syed Abdul Bari confirmed the matter to Prothom Alo. He, however, declined to make any comment on the matter.
What the central bank’s instructions say?
The Bangladesh Bank’s letter sent to NBL said the bank would not able to disburse fresh loans until its advance deposit ratio (ADR) is brought down to 87 per cent.
The NBL is now maintaining 92 per cent ADR. The NBL’s deposit now stands at Tk 430 billion (43,000 crore) and loan at Tk 410 billion (41,000 crore). As a result, the bank will be required a significant growth in deposit to disburse loans plus recovery of loan will have to be increased at a faster rate than before.
However, the bank has taken a toll on its deposit collection because of the recent situation. According to the letter, even if the NBL wants to disburse loans by bringing down its ADR at 87 per cent, it will have to maintain an annual credit growth ceiling of 10 per cent.
Bangladesh Bank also set the limit of large volume loan and the limit of loan for a single borrower. The limit of large volume loan has been set at Tk 1.53 billion (153 crore) – some 5 per cent of NBL’s paid-up capital, which now stands at 30.66 billion (3,066 crore).
On the other hand, the limit of loan for a single borrower has been set at Tk 3.06 billion - 10 per cent of the bank’s paid up capital. The limit includes funded and non-funded loans. NBL will not be able to buy loans from other banks and financial institutions until further notice is issued.
Besides, the central bank has sought details on the recovery of loan from the top twenty borrowers. For other banks, the central banks wants details on top loan defaulters, but for the NBL, Bangladesh Bank sought the details of top borrowers.
According to the NBL’s February report, S Alam Group, Maisha Group, Bashundhara Group, Beximco Group, Nassa Group, Saad Musa Group, Naf Trading, Western Marine Shipyard, FMC Dockyard, Pran-RFL, Bloom Success International and Broadway Real Estate are among the top twenty borrowers of the bank.
The central bank’s letter said appointment of advisors, consultant, and two positions below the post of managing director are subject to the approval of Bangladesh Bank. As a result, appointment of the chosen persons at the top position of the bank has has been stopped. Former additional MD ASM Bulbul ran the bank on behalf of the sons of the Sikder family. He isn’t coming to the bank anymore since the centrals banned him from carrying out the responsibility of MD. So, a fresh appointment for him will require the approval of the central bank.
Why this decision
The long-time chairman of NBL, Zainul Haque Sikder, died on 10 February. His wife Monowara Sikder became the new chairman on 24 February. Since then, no meeting of the bank’s board of directors was held, but NBL disbursed loans worth about Tk 5 billion (500 crore) and question has aroused over the beneficiaries of these loans. The sons of the late chairman are mainly running the bank. Several top officials of the bank also involved in irregularities.
The discontent between Sikder family and NBL directors became more visible in the board of directors on 12 February. Proposal to approve loans disbursed by flouting rules were made on that day, but the daughter of Zainul Abedin Sikder and chairman of NBL’s executive committee Parveen Haque Sikder opposed it. Directors other than those from Sikder family backed her. As a result, these loans were not approved.
According to NBL sources, incumbent chairman Monowara Sikder, her two director sons -- Ron Haque Sikder and Rick Haque Sikder, and two officials of Sikder Group -- Naimuzzaman Bhuiyan and Badiul Alam, who are also directors of the bank, altogether are in one side.
Parveen Haque Sikder has gone against them. Other directors Khalilur Rahman of KDS Group and Moazzem Hossain, Mabroor Hossain and Zakaria Taher of Hoassaf Group have been supporting her directly or indirectly. They want no more irregularity takes place. Amid this circumstance, the central bank continues special inspection on NBL.
Executive director and spokesperson of Bangladesh Bank Serajul Islam told Prothom Alo that National Bank had no MD for long. Now an MD has been appointed for three months. Several directors of the banks have involved in irregularities. That is why a set of instructions including ban on loan disbursement has been given. If the state of the bank improves, the instructions will obviously be withdrawn. However, the situation will be reviewed beforehand, he added.
Two director-sons in limelight
With the change of the government in 2009, the NBL’s board of directors was also reshuffled. The chairman of Sikder Group, Zainul Abedin Sikder, took over the bank, eventually ousting all other directors. The Sikder family took sole control over the bank with appointing the new chairman’s wife, sons and relatives and the leaders of Awami League in the board of directors. Since then, financial condition of the bank started to deteriorate.
According to the financial report of the bank, its default loans have increased to Tk 20.85 billion (2,085 crore) in December last year from Tk 3.88 billion (388 crore) in 2009.
Among the private banks, the NBL has written off the highest amount of money to remove default loans from the balance sheet. The bank, however, couldn’t reduce the default loans. The loan written off stood at Tk 21.54 billion (2,158 crore) last year. According to several reports of Bangladesh Bank, loan money has been directly deposited to the accounts of the Sikder Group and their sons. As a result, the actual scenario of the default loans couldn’t be assessed.
In the meantime, Sikder Group MD and NBL director Ron Haque Sikder and his brother Dipu Haque Sikder had been in the spotlight after they fired shots at Exim Bank managing director Mohammad Haider Ali Miah and additional managing director Mohammad Firoz Hossain on 7 May 2020. Ron Haque Sikder and Dipu Haque Sikder are the sons of the late chairman of NBL, Zainul Abedin Sikder.
The Exim Bank authorities filed a case on 19 May, but the brother duo left Dhaka on an air ambulance as ‘patients’ on 25 May afternoon.The court also fined the brother duo after they filed bail petition while on the run. After the death of Zainul Haque Sikder, Ron Haque Sikder returned to the country on 12 February and he was released on bail several hours after being arrested. Another brother Dipu Haque is still on the run. The investigation into the case is underway.
Regarding this, former governor of Bangladesh Bank Salehuddin Ahmed told Prothom Alo that previously the central bank remained silent because of pressure. Maybe there is no pressure now, so they become active.
Besides, the incidents at NBL will affect others banks since it’s a large bank. Lack of trust will arise among the depositors. Considering this, the central bank has started taking various steps and it’s a good sign.
It will bring back trust among depositors. Now the bank (NBL) will have to emphasise the recovery of loans. Only then, it can disburse loans. And loans will have to be given to good clients only, Salehuddin Ahmed added.
This report appeared in the printand online edition of Prothom Alo and has been rewritten in English by Hasanul Banna