As soon as a monetary powerhouse, the disclose-owned Janata Bank now finds itself in a complex scenario with non-performing loans (NPLs) surpassing 61% of its portfolio – a crisis resulting from unchecked lending to essential conglomerates comparable to Beximco and S Alam groups, leaving the bank in existential crisis.
This reliance on borrowing raises issues about doable non-compliance with regulatory Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements, thereby increasing the lender’s solvency risk.
On 14 November, Janata Bank Chairman Muhammad Fazlur Rahman wrote to Finance Secretary Md Khairuzzaman Majumder, outlining the bank’s serious scenario and asking for rapid steering from the Ministry of Finance and the Bangladesh Bank.
Fazlur, nonetheless, declined to suppose when approached by TBS, explaining that the enlighten entails complex policy issues.
Internal records from Janata Bank screen that each Beximco Community and S Alam Community obtained loans that breached banking rules all over ancient prime minister Sheikh Hasina’s 15-365 days tenure.
Beximco owes Janata Bank a total of Tk23,407 crore, with Tk19,507 crore categorised as base loans and Tk3,394 crore overdue, which is anticipated to turn base inside the next few months.
Alarmingly, this borrowing surpassed the absolute most sensible borrower exposure restrict of 25% of a bank’s capital, reaching an overwhelming 410%. Despite this sure violation of the Bank Firm Act, the central bank didn’t behave the utilization of its regulatory oversight.
In the same device, S Alam Community’s loans, totalling Tk11,000 crore, hold also turn out to be non-performing.
Collectively, the 2 conglomerates memoir for nearly 50% of Janata Bank’s total NPLs, having fun with a necessary role in the bank’s monetary decline.
“Unheard of liquidity crisis”
“The resources of Beximco and S Alam wants to be offered to obtain properly the bank’s dues. If no longer, there may perchance be no longer any point in conserving huge, unprofitable banks esteem Janata alive. It may perchance perchance perhaps well quiet both be liquidated or offered to foreign traders.”
In accordance with the chairman’s letter, Janata Bank is facing an unparalleled liquidity crisis. The bank’s incapacity to obtain properly loans has left it unable to elongate fresh credit, while its reliance on interbank borrowing has turn out to be extra and extra unsustainable.
In the letter, Fazlur Rahman states, “The failure to successfully obtain properly loans from huge borrowers, mixed with persisted lending to them, has resulted in loan concentration amongst a couple of purchasers. Without halting fresh loans to those borrowers, the bank can no longer overcome this crisis.”
Honest no longer too long in the past, the bank rejected a Tk60 crore loan query from Beximco Community.
As of now, Janata Bank’s provision shortfall has reached Tk39,086 crore, while its capital deficit has grown to Tk33,921 crore – a scenario unparalleled in the bank’s historical previous.
Bangladesh Bank files indicate that total defaulted loans in the banking sector stood at Tk2.85 lakh crore as of September, with Janata Bank accounting for 21.22% of the quantity.
“To ensure Janata Bank’s survival, loan restoration from huge borrowers is imperative. Given the most up-to-date authorities substitute, overcoming the crisis and ensuring the bank’s existence requires coordinated increase from the authorities, the central bank, and associated regulators,” stated the chairman.
In accordance with Janata Bank files, in most up-to-date years, sure branches indiscriminately extended loans to a restricted resolution of borrowers, including Beximco, S Alam Community, and Thermex, violating single-borrower credit limits and tons of rules.
Fund mismanagement has compelled the bank to rely heavily on borrowing to preserve each day operations – a matter of effort for the authorities because the bank’s owner, the chairman necessary in the letter.
‘Get ways for loan restoration sooner than trying for govt serve’
Dr Zahid Hussain, a member of the job force fashioned for reforming the banking sector, knowledgeable TBS, “Janata wants to evaluate the quantity of collateral towards the loans to massive groups. Asking the finance ministry for pointers diagram inquiring for cash from the authorities to place the bank, inserting the effort of Janata Bank on the authorities’s lap.”
Janata Bank must first compose its possess loan restoration diagram, assess collateral cost, and rob steps to prevent future defaults sooner than trying for authorities assistance, he added.
Fahmida Khatun, govt director of the Centre for Policy Dialogue (CPD) and director of the Bangladesh Bank, knowledgeable TBS, “Two of the finest defaulters are S Alam and Beximco and they wreak havoc wherever they race.
“The scenario at Janata Bank is dire. A bank can no longer purpose this form. The resources of Beximco and S Alam wants to be offered to obtain properly the bank’s dues. If no longer, there may perchance be no longer any point in conserving huge, unprofitable banks esteem Janata alive. It may perchance perchance perhaps well quiet both be liquidated or offered to foreign traders.”
Fahmida stated, “Policymakers and the Bangladesh Bank must obtain a resolution to prevent job losses for workers.”
