BB asked to check rising loan defaults

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Bank chiefs yesterday sought the central bank’s intervention in the phenomenon of sharply rising numbers of loan defaults as a many leading businesses are struggling to repay debts since their owners are either detained or on the run from the ongoing anti-corruption drive.

The intervention was sought by the chief executive officers (CEOs) of commercial banks who met Bangladesh Bank (BB) Governor Salehuddin Ahmed to express their concerns at the rising numbers of loan defaults.

The bankers told the BB that the owners of some large business groups, who are detained or absconding from the government’s ongoing anti-crime and anti-corruption crackdown, are not being able to repay their loans as they are not being able to operate their bank accounts.

Some bankers fear that if the current trend continues, by December the amount of loan defaults by the companies with detained or fugitive owners will stand at Tk 500 crore to Tk 600 crore at the least.

After the meeting, the governor told the media that he advised the banks to deal with the problem by ensuring that those profit-making enterprises are kept afloat through the strength of their ‘bank-client relationships’.

Bank sources said the finance ministry is likely to release a guideline on how the banks should deal with the troubled companies, after the central bank had already sent a letter to the ministry regarding the matter.

The guideline is likely to be sent within a day or two to the BB, which will then circulate it among all commercial banks.

But the BB also told the banks that they should consult with lawyers to refer particular cases and problems to the central bank, as well as to exercise their own judgement in dealing with individual cases.

In the meeting, a CEO of a nationalised bank cited the example of the fugitive owner of Bashundhara Group, Shah Alam, who had sent a letter to all banks saying no one is authorised to operate his bank accounts on his behalf.

The CEO asked for a BB guideline on how to deal with the company which has more than a thousand crore of taka in loans, with its other directors, who are in the country, showing keen interest in operating the company.

Beximco Group with Tk 3,000 crore in bank loans, and with its CEO Salman Rahman in jail and its second man Sohel Rahman overseas, is in tatters as it cannot generate funds or form a business plan without the presence of the owners.

By June, a number of companies owned by Beximco defaulted on their loans, which made it difficult for profit-making Beximco enterprises to receive further bank loans.

Some of the loan defaulting Beximco subsidiaries are, Beximco Textiles, Padma Textiles, Shine Pukur Holdings Ltd, and Beximco Synthetics Ltd.

Even its flagship pharmaceutical company, Beximco Pharma, has been identified as a Special Mentioned Account (SMA), meaning in the early stages of defaulting on loans.

The group already sent a letter to the finance ministry asking it to relax its rules when dealing with the group.

Banking sources said other companies, with detained or absconding owners, might face similar fates if the banks do not act quickly to install appropriate safety measures.

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