The letter comes after the central bank on December 1 last year had sought an explanation from the 25-year-old NBFI over the multitude of irregularities unearthed by a BB inspection team
The Bangladesh Bank is now combing over the 120-odd pages of explanation that Uttara Finance and Investment has sent over its huge irregularities that were disinterred by a central bank inspection team.
No explanation is sufficient in response to the queries about the irregularities, said SM Shamsul Arefin, managing director of Uttara Finance, in the cover letter to the file sent on January 5.
“We are offering you apology that such types of mistakes will not happen in the future,” the letter read.
The letter comes after the central bank on December 1 last year had sought an explanation from the 25-year-old NBFI, where automobile distribution giant Uttara Motors has a substantial stake, over the multitude of irregularities unearthed by a three-member BB inspection team by going over its books until 2019.
The irregularities include lending money to director’s company without any application, paying huge amounts of cash to its chairman for no concrete reason, creating fake loans to pave the way for Uttara Group to withdraw Tk 335 crore, the managing director taking out money without any approval, concealing information of its directors using its coffers for personal needs, use of additional floor space owned by one of the directors without the BB permission.
The anomalies amount to about Tk 6,000 crore, according to the inspection report, which Dhaka Tribune has a copy of.
“No apology is acceptable in this case. The Bangladesh Bank is now examining their reply,” said Md. Serajul Islam, spokesperson of the central bank, yesterday.
If Uttara Finance’s response is not satisfactory, legal action will be taken against them, he added.
“We offered an apology to the central bank as we made some mistakes -- we are not angels that we can’t do no wrong,” Arefin told Dhaka Tribune yesterday.
The NBFI will call a press conference today to clarify the matter, he added.
Meanwhile, the news of operational transgressions of Uttara Finance, which has been listed since 1997, has had an ill effect on its peers: the share prices of 17 out of 22 NBFIs have taken a beating yesterday.
And shares of seven listed NBFIs -- Bangladesh Industrial Finance, Fareast Finance, FAS Finance, First Finance, International Leasing, Premier Leasing, Prime Finance and Union Capital -- were trading at less than their face value of Tk 10.
Shares of Uttara Finance, which shed about 28.2 per cent over the past two years, closed at Tk 49.7 yesterday, down 1.78 per cent from the previous trading session.
The sector, which contributed to 4.6 per cent of the total turnover of the Dhaka Stock Exchange last year, was already suffering for the liquidation of People's Leasing, the problems at International Leasing and the rising default loans. And now came another bout of bad news.
Default loans at the 33 NBFIs soared 15 per cent from the previous quarter to Tk 10,244.7 crore between July and September despite the loan moratorium facility offered by the central bank.
At the end of the third quarter of 2020, the NBFIs’ bad loans accounted for about 15.5 per cent of their total outstanding loans of Tk 66,215.4 crore, according to data from the central bank. Three months earlier, default loans accounted for 13.3 per cent of the outstanding loans.
To put things into perspective, default loans soared 49.8 per cent from a year earlier at the NBFIs.
“The Bangladesh Bank is the primary regulatory body of the sector. We are waiting to see what action it takes in this regard,” said Shibli Rubayat-Ul-Islam, chairman of the Bangladesh Securities and Exchange Commission.
The securities regulator will take action considering the interests of the stock investors.
“We are looking at the matter so seriously,” he added.
If any company performs badly, the entire sector is affected, said A Quadir Chowdhury, a former president of the Bangladesh Leasing and Finance Companies Association (BLFCA).
“The present state of the NBFI sector has been in the making for 10 years. This was due to unprofessional directors,” he added.
Of the 22 listed NBFIs, 16 are listed in the ‘A’ category, meaning they regularly provide dividends of more than 10 per cent to their shareholders.
There are two NBFIs in the B category, meaning they provided less than 10 per cent dividend. Four NBFIs provided no dividend in their last financial year and hence find themselves in the Z category.
Uttara Finance, which was established in 1995, was an ‘A’ category share: it provided 15 per cent cash and 5 per cent stock dividends for its 2019 financial year, in which it logged in 14.3 per cent higher profit of Tk 118.3 crore.
logged in losses of about Tk 15 crore
However, between July and September of last year, it logged in losses of about Tk 15 crore, in contrast to a profit of Tk 33.6 crore a year earlier.
At the end of September, Uttara Finance’s 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.