Janata Bank is yet to undertake any effective measures to come out from under huge bad loans, mainly to a number of businesses, including Anon Tex and Crescent Group, defying central bank regulations.
The state-owned commercial bank lent above Tk 10,000 crore to Anon Tex and Crescent Group, a Bangladesh Bank(BB) recent report unveiled, saying Janata did not comply with the central bank’s single borrower exposure limit criteria.
Once considered a good performer among public sector banks, Janata is now going through troubled times, former BB Governor Salehuddin Ahmed said, adding there is no visible action plan of the bank for a turnaround.
Janata faced a net shortfall in capital to the tune of Tk 2,200 crore in June. Janata's downfall began in January this year. It incurred a huge loss of Tk 1,600 crore in the first six months of this year alone. In July and August, Janata Bank deposits also went down by Tk 2,612 crore.
In a recent meeting with the four SCBs, the BB asked them to fix a target for recovering bad loans as a whole, and particularly from top 20 defaulting companies.
However, there is no such visible progress made by Janata, although its Managing Director Abdus Salam Azad said they had already taken major steps to lower the extent of bad loans.
According Bangladesh Bank data, as of June 30, default loans of Janata Bank stood at Tk9,879 crore, which is 22% of its total loans. In December last year, it was 14.10% or Tk5,345 crore.
The bank has given loans of about Tk5,500 crore to Anon Tex, which is a clear violation of Bank Company Act 1991 as it provided 25% of the state-owned bank's capital base. According to the act, single borrower exposure limit is 10%.
“Non Performing Loans (NPL) have increased sharply due to massive lending to Crescent Leather, and the negative growth in earnings is caused by the provisioning of bad loans,” Janata Bank Managing Director Md. Abdus Salam Azad told the Dhaka Tribune.
The Janata Bank has given loans of about Tk5,000 crore to Crescent Group. The group took away Tk460 crore as incentives using fake export documents.
Overall, the banking sector and Janata Bank are going through bad times, said Salam.
“We have decided to bring down the default loans and to recover at least Tk2000 crore by this year. We have already asked the branches to take necessary steps. We are also holding meetings with the defaulters to devise ways to recover the loans,” said Salam.
Talking on the Anon Tex loan recovery, Salam said the company is paying installments regularly and we have already recovered Tk300 crore as of September this year.
Meanwhile, bank management is going to file a case against Crescent Leather with Artha Rin Adalat (Money Loan Court) to recover the loans.
The bank recently hired Barrister M Amir-ul Islam to face the loan default legal battles in the courts, said Salam.
Salehuddin Ahmed cited lack of good governance and widespread corruption as major reasons for the current dire situation prevailing at Janata and other public sector banks.
“The politically appointed bank directors often influence bank officials in the loan sanctioning process, resulting in default loans. In addition, weaknesses, corruption, and lack of experience among a section of bankers, helps create the situation,” he added.
The former central banker said, until and unless the political appointment of directors to the boards of state-owned banks is not stopped, the fate of other public sector banks would not be any different from that of Janata.
