DESPITE being mired in loan scams, the state-owned Janata Bank has been granting undue favour to yet another big borrower, allowing the company to open letters of credit (LC) one after another overstepping all sorts of banking rules. Media outlets, quoting Bangladesh Bank investigations, reported that Thermax group has been enjoying such privilege although the garment company has paid little of its previous dues, which now stands at a staggering Tk 1,230 crore. The ill-motivated activity of Janata’s top brass has plunged the bank near to bankruptcy. The directors and employees of the bank are not owners rather trustees on behalf of citizens while the regulatory body central bank is too weak to fix the derailment.
As per rules, when a company fails to pay back the money against an LC, the amount becomes a forced loan. It disqualifies the borrower from availing the LC service until it clears the outstanding loan. Thermax has an LC limit of Tk 264 crore against its three entities. In reality, it received LC benefits worth Tk 816 crore between 2013 and 2016, more than three times of the ceiling, from the bank’s corporate branch at Motijheel. This was done without approval from the bank’s board. As a result, Janata’s total outstanding loan to Thermax — Tk 1,230 crore (interest and other charges included) as of March this year — exceeded the single borrower exposer ceiling of 15 percent set by the BB. During two other investigations in 2015 and 2016, the BB team did not find any record at the central bank that Janata took approval from the BB, which is mandatory for sanctioning loans beyond the limit.
The Group has a total loan of Tk 5,000 crore from various banks as of August this year. Of the sum, Tk 1,446 crore is defaulted. In 2015, the company restructured Tk 642 crore of its loans from Janata Bank under the special large loan restructuring package offered by the BB.
Strangely, BB’s banking regulation and policy department advised Janata Bank to make the decision based on “bank-client relations” which goes against the regulation.
