Cash-strapped Islami Bank PLC approved TK 7 billion as loan to one of the closed concerns of AnonTex Group, one of the largest loan defaulters of Janata Bank. The loan was approved for Shob Meher Spinning Mills, a concern of AnonTex. The group has already withdrawn Tk 1.4 billion out of the loan in the first two days of the current month. The factory is situated at the Tatarkandi village of Sadharchar Union of Shibpur upazila of Narsingdi. While visiting the factory last Tuesday it was learnt that the factory has been closed for a year.
The loan was approved during the 1997th executive committee (EC) meeting that took place on 24 August. Ahsanul Alam, the chairman of the bank, himself is the chairman of the EC. He is the son of Saiful Alam, the chairman of S Alam Group. The S Alam Group took control of the Islami Bank in 2017. The person who was appointed as the observer last December by Bangladesh Bank in the Islami Bank due to many irregularities, was also present in the meeting. Several sources of Bangladesh Bank and Islami Bank confirmed the matter.
Islami Bank branch managers’ authority to provide loans was taken away last July. Even that of divisional and zonal heads no longer had the authority to provide loans. But the provision of providing loans in the agricultural sector remained. Only three per cent of the total loans of the bank is allocated to agriculture. Under the circumstances, the bank directors decided to approve the new loan.
When asked, Islami Bank managing director (MD) Mohammad Munirul Mawla told Prothom Alo, the loan was approved at the bank’s EC meeting. He declined to answer what is the reason for providing a loan to a closed concern.
Islami Bank is still not able to maintain Cash Reserve Ratio (CRR) and Statutory Liquid Ratio (SLR) in Bangladesh Bank against deposits. For this, the bank is even unable to pay the penalty even if it has been fined daily. In this situation, Bangladesh Bank is keeping Islami Bank's check clearing and online transaction system running by occasionally proving loans. Under the circumstances, the question arises as how the loan was given to a shut-down concern.
How the loan was approved
It is learnt Shob Meher Spinning Mills is basically a factory built with loans from Janata Bank. Until last year the company had a default of around TK 1.80 billion with the bank. AnonTex is one of the largest clients of Janata Bank. In November last year, the Janata board extended a Tk 33.59 billion interest waiver to AnonTex on the condition that it pays back Tk 48.20 billion by June. But the group failed. After that, on 25 July the board of directors of Janata Bank extended the time of repayment to December of the current year. But as a new condition the AnnonTex was asked to sell two of their companies and deposit the due amount to Janata Bank by 30 September.
At the EC meeting of Islami Bank on 24 August the loan of Tk 7billion was approved for Shob Meher Spinning Limited, a concern of AnonTex. Among the loans, Tk 5 billion was non-funded (LC, guarantee) and TK 2 billion was funded (direct loan). Before that on 16 July an account by the name of Shob Meher Spinning Mill was opened at the Foreign Exchange Corporate Branch adjacent to the head office of Islami Bank. From this account out of the disbursed loan, Tk 700 million was withdrawn through three bouts on 5 September and the same amount was withdrawn through four bouts on September 7. The bank disburses this loan through the Murabaha TR process. In this process the loan is disbursed to purchase commodities but in reality, no information was found regarding the purchase of commodities.
Some officials of Islami Bank seeking anonymity said, S Alam group has started the process of buying some companies of AnonTex. For that reason, the loan was disbursed in a hurry. But there is no legal provision of repaying the loan of one bank by borrowing from another bank, according to the regulations of Bangladesh Bank.
Janata Bank Managing Director Abdul Jabbar told Prothom Alo in his office last Wednesday, "The loan of AnonTex Group has been rescheduled. It was due till June, which has been extended till December. I hear the group is trying to sell their companies. We have also given permission to sell two companies. To sell, they have to pay off all our debts. I have not received any money till now."
Liquidity crisis not averted, no punishment
Meanwhile, the Islami Bank has been suffering from a liquidity crisis after many loans were disbursed anonymously from the bank. However, none of the officers involved in disbursing such loans were punished, rather some were promoted. As a result of Islami Bank's liquidity crisis, four other Shariah-based banks belonging to the S Alam group are also facing liquidity crisis as these banks were dependent on Islamic banks for liquidity support.
According to a report by Moody's Investors Service last Thursday, the liquidity crisis in Bangladesh's Shariah-based banks is lingering. This situation has arisen due to the decrease in clients’ deposits and failure to utilise most of the support measures provided by the central bank. The impact of liquidity crunch can also affect the credit quality of the banks. As a result, the country's Islamic banks may face problems in meeting short-term liabilities.
According to Moody's, in 2022, 10 Islamic banks in the country were able to maintain liquidity according to the regulation. But after 6 months, it appeared that 4 out of 10 banks had fallen behind in this regard. Although 6 banks were able to maintain liquidity as per the regulations, their excess liquidity was low.
Another leading rating agency, Fitch Ratings, said that Shariah-based banks are suffering from more liquidity problems compared to the conventional banks due to loan irregularities.
According to Bangladesh Bank sources, On 24 November last year, Islami Bank had a deposit of Tk 1.51 trillion 5.03 billion which decreased to Tk 1.41 trillion 6 billion last December. After that last August the deposit increased to Tk 1.49 trillion 170 million but that again decreased to 1.47 trillion 7.92 billion. These amounts are deposited by around 15 million clients. The large chunk of the depositors of the bank are from rural areas but the loans are being disbursed to Dhaka and Chattogram.
Executive Director of Policy Research Institute Ahsan H Mansoor told Prothom Alo that the government and Bangladesh Bank are not bothered about the irregularities of this bank. This bank's lending powers should be taken away immediately to protect depositors' money. The bank has been destroyed for a long time, yet no government initiative is seen.
On Tuesday afternoon Prothom Alo’s Narsingdi correspondent Pranab Kumar Debnath upon visiting the Shob Meher Spinning Mill at the Tarakandi village of Sadharchar union of Shibchar upazila saw the main gate of the factory is closed and no signboard was seen. After calling for some time, two security personnel named Abdur Rahim (65) and Fazlul Haque Kazi (60) came and opened the gate to let this correspondent enter. The first thing that caught the attention was a signboard pasted on the wall. In the English it was written “Shob Meher Spinning Mills Limited, financed by Janata Bank Limited’ on the signboard.
Local people said, a certain Yunus Badal is the founder of the AnonTex factory that manufactures cotton yarn. He established the factory seven or eight years ago and named it after his grandmother Shob Meher. He himself conducted it in almost the first three years. Later, after being closed for two years it was rented out to another company. They left the factory after running for about a year due to incurring losses. Since then, the factory has been completely closed for a year. There is no one here except 14 security personnel. Even a year ago, however, 700-800 workers used to work here.
A tour of the factory saw multiple tin sheds spread over a large area in the middle of the factory premises built over a huge space. There is also a six-storey building. But everything is locked. Except for the building, the rest is covered with overgrowth. It was not possible to see the machinery inside the buildings as these were locked.
* This article appeared in the print and online edition of Prothom Alo and has been rewritten for the English edition by Syed Faiz Ahmed