The NBFI uses floor space owned by one of its directors without BB authorisation
Uttara Finance and Investments, a non-bank financial institution where automobile distribution giant Uttara Group has a substantial stake, is using additional floor space owned by one of its directors without the central bank’s permission.
The Bangladesh Bank’s permission is mandatory for banks and NBFIs before extending floor space, as per the Financial Institution Act.
“Uttara Finance has extended its floor space by violating laws,” said a high official of the BB well-versed on the matter seeking anonymity.
The NBFI is showing an extra expenditure of Tk 6.53 lakh per month as rent against the additional 7,422 square feet of floor space, according to a recent inspection report of the central bank.
The inspection, conducted by a three-member team on the books of Uttara Finance until 2019, unearthed a host of discrepancies. The team has submitted its report recently. Dhaka Tribune has a copy of the report.
From lending money to director’s company without any application to paying huge amounts of cash to its chairman for no concrete reason, from creating fake loans to pave the way for Uttara Group to withdraw Tk 335 crore to the managing director taking out money without any approval, the NBFI, which has been flying under the radar, has indulged in a host of indiscretions.
And, the NBFI has been concealing information of its directors using its coffers for personal needs, found the BB inspection.
The central bank has sought an explanation from Uttara Finance about the irregularities, BB Spokesperson Md. Serajul Islam told Dhaka Tribune.
SM Shamsul Arefin, managing director and chief executive officer of Uttara Finance, said the NBFI has dispatched its response to the central bank on January 5.
“The matter is very confidential, so I cannot say more. We will inform the media about the issue after receiving the Bangladesh Bank’s reply,” Arefin told Dhaka Tribune.
Following Uttara Finance’s application in 2006, the financial institution and markets department of the central bank that year allowed the NBFI to expand its head office at the 11th floor of 102 Shaheed Tajuddin Ahmed Avenue, Tejgaon, Dhaka.
The size of the extended floor space is at 7,130 square feet.
As per the BB report, Uttara Finance’s legal floor space for head office stands at 12,188 square feet including 5,058 square feet on the 7th floor of JBC Tower on 10 Dilkusha commercial area in the capital, the NBFI’s previous head office.
All the activities of the head should be conducted through the floor spaces but the central bank inspection team found that the NBFI conducted its business through a 7,422 square feet unauthorised floor space in a building located at 102 Shaheed Tajuddin Ahmed Avenue.
The NBFI is using 3,522 square feet on the fourth floor, 1,700 square feet on the fifth floor and 2,200 square feet on the 6th floor in the building, none of which the central bank has signed off on, according to the inspection report.
“This violates the regulations and laws.”
The company pays Tk 6.53 lakh per month as rent for the floor space and the directors of the NBFI are the owners of the floor spaces, as per the report.
The depositors and general shareholders are being deceived by the NBFI showing extra expenditure through irregularities, said Khondkar Ibrahim Khaled, a former deputy governor of the central bank.
The lack of proper supervision and monitoring by the BB is responsible for the ailing situation of the NBFI.
“The central bank should be more vigilant in protecting the interest of the depositors and general shareholders.”
The law states what to do if an NBFI goes bad, but the central bank is not following the law. As a result, a number of NBFIs went from bad to worse, he added.
The NBFI, which was established in 1995, logged in losses of about Tk 15 crore between July and September of last year, in contrast to a profit of Tk 33.6 crore.
At the end of September, its deposits stood at Tk 2,073.6 crore, up 8.7 per cent year-on-year.
Its loans stood at Tk 3,440.5crore at the end of September, in contrast to Tk 3,431.3 crore.
Listed since 1997, Uttara Finance’s shares shed about 26.9 per cent in value over the past two years. Yesterday, they closed at Tk 50.6, up 2.2 per cent from the previous trading session.
In 2019, the company logged in 14.3 per cent higher profit of Tk 118.3 crore for which it disbursed 15 per cent cash and 5 per cent stock dividend. A year earlier, it had provided a 20 per cent stock dividend.