Bangladesh Bank has urged banks to provide concessions to City Group to keep its business operations running and initiated efforts to form a consortium of banks to provide working capital support to the conglomerate.
The directives were issued at a meeting held at the central bank on Sunday, October 25, attended by Bangladesh Bank Governor Mostaqur Rahman, Deputy Governors Kabir Ahmed and Sarwar Hossain, and City Group Managing Director Md Hasan.
Senior executives from several banks also attended the meeting, including Association of Bankers, Bangladesh (ABB) Chairman and City Bank Managing Director Masrur Arefin, Mutual Trust Bank Managing Director Syed Mahbubur Rahman, Bank Asia Managing Director Sohel R K Hussain, BRAC Bank Managing Director Tareq Refat Ullah Khan and representatives of other lenders.
City Group has outstanding loans of around Tk 26,000 crore with 47 domestic and foreign banks and financial institutions. Its major lenders include HSBC, Standard Chartered, City Bank, United Commercial Bank (UCB), Eastern Bank and BRAC Bank.
According to central bank sources, Bangladesh Bank had instructed lenders not to classify the group’s loans as defaulted until September. After the deadline expired, several banks began classifying the loans, while others considered restructuring or rescheduling them.
A loan default at one bank can prevent a borrower from opening letters of credit (LCs) with other banks, disrupting City Group’s imports and business operations.
At Sunday’s meeting, Bangladesh Bank instructed lenders to avoid taking measures that could force the conglomerate to shut down its operations. City Group has been asked to deposit 3% of its outstanding loans with the banks to regularise its borrowings.
If the group deposits the required amount within October, the banks will jointly submit a proposal to Bangladesh Bank for loan restructuring and rescheduling. Bankers expect that regulatory approval could help the conglomerate overcome its financial difficulties and revive its business operations.
