The turmoil in the banking sector is not stopping. The once reputable banks are plagued by defaulted loans due to irregularities, mismanagement and lack of good governance. Defaulted loans have been increasing at an increasing rate for a long time, and there is a hint of further increase in the future.

According to the latest data from Bangladesh Bank, the total defaulted loans in the banking sector have increased to 2 lakh 84 thousand 977 crore taka, which is about 17 percent of the total loans disbursed.

There are allegations that although defaulted loans are increasing at an alarming rate, some bank officials are trying to hide it. Illegal benefits are also being given. Although the central bank has repeatedly stated its strict stance.

Once again, private sector AB Bank has opened a letter of credit (LC) in violation of the central bank’s instructions. Bangladesh Bank has fined the bank for violating the instructions. Earlier, the bank had also faced a fine from the central bank for hiding information about defaulted loans of Pacific Motors and giving special benefits.

According to bank sources, the central bank had announced that all types of loans, except agricultural loans and CSME loans, of the Gulshan branch of AB Bank PLC have been suspended for the time being. In addition, 12 customers of the branch – Global Corporations, Sky Apparel Ltd., Fu-Wang Ceramic Industries Ltd., Saleh Steel Industries Ltd., S. S. Steel Ltd., Saurav Fisheries and Agro, RSA Capital, Lighthouse Infrastructure, Delta Healthcare Mirpur, including customers, were banned from giving any new loans. The central bank withdrew the ban on Global Corporations, among the above-mentioned borrowers, following their application. The ban remains in force for the remaining customers.

Despite the central ban being in force, an e-mail was sent to the bank on October 28, seeking the names of the officers who approved 11 LCs in favor of the concerned customer. In view of this, the bank informed through an e-mail on the next day, October 29, that the above 11 loans have been established within the (revolving) credit limit of Tk 350 (28/12/2022) crore approved by the Board of Directors of AB Bank. Therefore, this does not include the provision of any new credit facility. Since the LC has been established within the (revolving) credit limit of Tk 350 crore, no new approval is required here. Bangladesh Bank had instructed on December 24, 2023 that no new credit should be given to that customer. This (revolving) credit facility of Tk 350 crore was given to the customer on November 28, 2022. Reviewing the bank’s response, it is seen that the names of the officials involved in approving the said LCs were not disclosed, which is inappropriate and the validity of the LC credit limit approved by the Board of Directors on November 28, 2022 was valid until November 27, 2023.

The central bank said that the branch’s foreign trade in-charge, branch manager, head of business division of the head office and above all the managing director and chief executive officer are responsible for issuing and approving the said LCs again in violation of the instructions of Bangladesh Bank. When the bank gave an explanation in this regard, it was not satisfactory, said a central bank source. In this situation, Bangladesh Bank fined the bank two lakh taka under section 109 (7) of the Bank Companies Act, 1991 (as amended up to 2023) for violating the provisions of section 44 (6) (c) and section 45 (1) of the same act.

In this regard, Syed Mizanur Rahman, Acting Managing Director of AB Bank, told Jago News, ‘I know that Bangladesh Bank has imposed a fine in the matter of S. S. Steel. “But I don’t know anything about whether it is an illegal benefit or not, not in my time. It is a very old file, we will have to see it and say. But we have applied to Bangladesh Bank for reconsideration. So far, there has been no solution (waiving of fine).

AB Bank’s total loan balance is Tk 32,338 crore. Of which, defaulted loans are Tk 10,115 crore 65 lakh or 31 percent of the total loans disbursed. However, there is no provision deficit as it has taken special facilities from Bangladesh Bank until 2029. However, if the special facilities given during the tenure of former Governor Fazle Kabir are excluded, the bank will face a provision deficit of more than Tk 8,000 crore.