Bangladesh Bank gives in to influence

Backtracking on its earlier stance Bangladesh Bank has given consent to a loan-freezing proposal by Virgo Pharmaceuticals, an influential borrower of Rupali Bank. As per the proposal, Virgo Pharmaceuticals sought an eight-year suspension on the repayment of its loan of Tk300 crore. The company requested the central bank to keep its loan account frozen until 2022 with no new interest on the credit and start paying off the loan instalments from 2023 on quarterly basis until the full payment is made in 2030. Although completely unacceptable as per banking norms, Virgo Pharmaceuticals’ proposal went further demanding more loans. It went so far as to ask the bank even to reduce the interest rate to 8.50% from the existing 9%. Bangladesh Bank Governor Fazle Kabir had turned down the loan reschedule proposal last month on the grounds that such long time suspension would put the repayment into a great deal of uncertainty. Moreover, such advantage never goes with banking practice and norms. But soon after the proposal had been rejected, Bangladesh Bank had to face a lot of pressure from influential people to reconsider its decision, said a senior executive of the central bank asking for anonymity. Mysteriously the board of Rupali Bank approved the proposals of this influential borrower and sent it to Bangladesh Bank for final approval in June this year. At first Bangladesh Bank was surprised by the proposal and ignored it. But after a few days an influential lobbyist put heavy pressure on the officials concerned at the Banking Regulation and Policy Department (BRPD) of the central bank, said the senior executive. Finally, the BRPD gave in and placed the proposal before Governor Fazle Kabir who, however, turned down the restructuring proposal again. After a few days, however, the governor asked the department concerned to place again the restructuring proposal. Giving no objection to the restructuring proposal, the governor then asked Rupali Bank to consider the proposal on the basis of bank-client relation. In 2014, Bangladesh Bank identified that the loan to Virgo Pharmaceuticals was sanctioned  violating the single borrower exposure limit. The bank did not even inform the central bank in this regard, and Bangladesh Bank fined the state-owned Rupali Bank Tk100,000 for that. Later, the bank confessed to its wrongdoing and requested the central bank to reconsider its financial penalty. Atiur Rahman, the then governor, remitted the fine following the request. When contacted, Incumbent Governor Fazle Kabir declined to make any comment over the issue on the excuse that it was an official matter. Ataur Rahman Prodhan, managing director of Rupali Bank who had himself advocated the favour for Virgo Pharmaceuticals, said he is not aware of this specific case as he had very recently joined the bank. He said sometimes such favour could be provided to clients to help them recover from their business loss.