Rupali Bank runs a capital risk through providing credit beyond its absorbing capacity, according to a Bangladesh Bank report.
The bank has already been suffering from capital shortfall of about Tk217 crore as in June this year from its surplus capital of about Tk20 crore in December last.
Orion Power khulna owed Tk1,706 crore to Rupali Bank which was 70% more than the bank’s capital of Tk1,008 crore at the end of June this year. The capital of the bank will become negative if Orion Power crashes at any reason.
The client was very risky for the lender, but the central bank executives have been asked to treat the case as risk-free since there is no certain loan limit specified for financing the power sector, said a senior executive of Bangladesh Bank.
“They have been provided with the loan considering their business performance,” Rupali Bank Managing Director Farid Uddin told the Dhaka Tribune.
According to the central bank report, the loan status of Orion Power Khulna, a client of local office in Dhaka of Rupali Bank, was Tk916.62 crore against the approved loan limit of Tk1060.42 crore as of June this year.
The loan status was already beyond the single borrower exposure limit of Tk151.18 crore.
The company owed an excess loan of Tk765.44 crore to the Rupali Bank while the central bank loan department did not provide any NOC for the Rupali Bank.
Besides, the client further proposed for a loan of Tk945.87 crore to the bank and the board of directors of Rupali Bank approved the loan proposal at its 944th meeting.
As a result the total loan status against the client stood at Tk1,862.49 crore which is Tk1,711.31 crore more than the limit.
Of the total loan, the funded amount was Tk1,705.17 crore.
According to section 26 (kha) of the amended bank company act 2013, all kinds of loan facilities given to an individual or any group will not exceed 25% of the bank’s capital.
The highest loan limit for the Orion Power was Tk252 crore in accordance with the rule.
But the company has been allowed to hold an excess loan of Tk1,453 crore from the certain limit which is a violation of the law.
The report said it was not clear to the central bank authorities why Rupali Bank issued the big chunk of loans without going through a formal syndication process.
The Rupali Bank board approved loan to nine more institutions, violating the single borrower exposure limit from January to June this year.
Bangladesh Bank has found huge irregularities in loan approval process of the bank board and marked the bank as more risky in its report.
The classified loan ratio of the bank, however, dropped to 15.60% in June this year from 17.48% in December last year due to regularisation of huge classified loan through rescheduling process.
Among the state-owned banks, Rupali Bank rescheduled the highest amount of loan of Tk3,137 crore from December last year to June this year through taking advantages of relaxed policy given by the Bangladesh Bank.