Bangladesh Bank has fined the state-run Rupali Bank for flouting rules in loan formalities.
The bank has been penalised Tk1 lakh for providing loans to two companies exceeding single borrower exposure limit and for not submitting statements related to large loan for these companies to the respective section of Bangladesh Bank.
According to a letter sent to Rupali Bank, the board of directors approved loans against Galco Steel and Virgo Pharmaceuticals in 939th and 941th board meeting, violating single borrower exposure limit set in MoU.
As of June, a total of Tk114.98 crore loan facility was provided to Virgo Pharmaceuticals, violating the exposure limit, according to a report of central bank.
Moreover, Virgo Media Limited, an associate company of the client, holds a loan of Tk144.74 crore to the bank. As a result the total loan balance against the two companies stood at Tk259.72 crore which exceeded the exposure limit at wide scale.
The bank did not report to the central bank about the large loan of these two companies.
Galco Steel, a sister concern of S Alam group, was allowed to hold loan of Tk133 crore by the board of the bank, which was beyond 15% of the bank’s paid up capital.
The report also noted that Bangladesh Bank signed MoU for the year 2013-14 with Rupali Bank to improve its financial indicators and to ensure compliance of prudential guidelines by the bank’s management, but the bank was found repeating irregularities at the board meetings.
The central bank has called for explanation for violating rules on August 07.
The Rupali Bank explanation sent to the central bank on August 19 said at the time of approval, principal loan balance against Virgo Pharmaceuticals was within the single borrower exposure limit.
The allowed principal loan amount was Tk88.82 crore in the period between 2009-2012, but the total loan amount including interest stood at Tk114.98 crore as of June which was beyond the exposure limit.
The board of the bank renewed the loan account and extended the repayment period further against the loan account without taking NOC from Bangladesh Bank inadvertently, though, the loan balance was beyond the exposure limit.
The bank in its explanation expressed sorrow for not reporting about the large chunk of loans to the central bank.
It also requested the governor through a letter to waive penalty.
Only Bangladesh Bank board has authority to consider the remission of punishment, according to the bank company act.
The central bank fined the Rupali bank as the explanation was not accepted, said a senior executive of Bangladesh Bank.
He said the bank, however, sought waiver, but the central bank did not accept it till now as the bank has tendency to violate the single borrower exposure limit repeatedly.
Though the violation of single borrower exposure limit is not a capital offence, the central bank strictly monitors it since the Hallmark loan scam, said Rupali Bank Managing Director Farid Uddin.
