National Bank vault under lock and key again
Bangladesh Bank (BB) has locked again the vault of National Bank Limited (NBL) as the central bank found gross irregularities in its loan activities, following the BB's approval on NBL’s loan operation on 30 December last year.
On 12 May, the central bank sent a letter to the private bank, restricting the latter from sanctioning any big loan.
Unlike previous time, the central bank did not entirely suspend the loan sanctioning rather the BB fixed the specific sectors where NBL can sanction its loan. Loans in SME sector, agriculture, loan under incentive package, loan against fixed deposit, and LC (letter of credit) and other non-funded credit facilities are among these sectors. The NBL, however, will not be allowed to perform loan acquisition of any bank and financial institution.
The central bank’s letter states the NBL lacks the standard in bank management and its financial health is deteriorating gradually. That is why such decision has been taken under the company act to protect the interest of the depositors.
The central bank on 3 May last year suspended the NBL’s loan operation on allegation of large-scale irregularities and corruption and set new limit for large volume of loans and for single-client. Besides, the NBL was instructed to submit details on top 20 borrowers.
After that, the bank functioned well for sometime. As the central bank lifted its instructions on 30 December last year following the pressure of several big firms, the financial health of the NBL returned to its previous state. As a result, the central bank instructed the NBL to halt its large-volume loan again.
Maisha Group, Bashundhara Group, Beximco Group, Nassa Group, Saad Musa Group, Western Marine Shipyard, FMC Dockyard, Pran-RFL, Bloom Success International, Broadway Real Estate are among the top 20 borrowers of NBL. Bloom Success International is an anonymous business frim. Previously, S Alam Group was the top borrower and when the bank wrote off entire interest, the business group returned the actual loan.
Sources said the NBL provided a loan worth Tk 8 billion (800 crore) to Fu Wang Ceramic and SS Steel, both companies owned by same person, after the central bank allowed the NBL’s loan operation on 30 December last year. The NBL’s board of directors decided to finance Tk 1.50 billion (150 crore) to three companies Saleh Steel, which is owned by SS Steel. However, the central bank halted this loan proposal. These three companies received this large volume of loan in a short time as a NBL director has a close relation with these firms. The Bangladesh Bank first warned the NBL and then held a meeting with the bank's senior officials. Since the NBL continued its loan operation, the central bank ordered to suspend it.
The central bank also instructed the NBL to submit information on the loan recovery from top 20 borrowers every month. In addition, the NBL will need central bank’s approval for reappointment and contractual appointment of its advisor, consultant and persons holding position two ranks lower than managing director.
When asked NBL managing director Mehmud Hossain told Prothom Alo on Sunday, “We received the central bank’s decision. We could not understand why such decision came despite there has been improvement in the index of bank.”
In addition to suspending the loan, six conditions were imposed on the NBL to prevent anonymous loan. As a result, the bank had no activities other than colleting deposits and recovering loans. Therefore, its deposit rose significantly and the state of the bank’s deposit improved.
As of April this year, deposit of the bank stands at Tk 448.68 billion (44,868 crore) and loan at Tk 399.77 billion (39,977 crore). The bank made a net profit of Tk 380 million (38 crore) in the outgoing year, enjoying various privileges from the central bank. NBL could not even provide dividend to its shareholders last year but once it was one of the top three banks making the profit in the country’s banking sector.
A central bank official on condition of anonymity told Prothom Alo the NBL follows no rules by any means and that is why ban has been imposed once again after withdrawing it.
Previously, the central bank as its last resort stopped the loan sanctioning of BASIC Bank and Padma Bank, formerly Farmers’ Bank, to save them from collapse. But the move did not work. Now the central bank is taking similar move on the National Bank but they cannot stick to their decision.
The NBL’s board of directors was changed following the change in the government in 2009 with Sikder Group chairman Zainul Haque Sikder taking over the bank. Since then, the financial health of this first generation bank started deteriorating. Zainul Haque Sikder died on 10 February last year and his wife Monowara Sikder became the chairperson of the bank on 24 February that year.
*This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Hasanul Banna