Accounting Fraud: Agrani Bank showed inflated profit despite Tk 1185cr net loss

Agrani Bank, a state-owned commercial bank, was found involved in showing inflated profit through ‘window-dressed’ accounting during the year 2012.
A central bank inspection team detected the ‘massive accounting fraud’ while scrutinising the bank’s balance sheet recently, official sources said yesterday.
According to the inspection report, Agrani Bank showed an operating profit of Tk 1314.61 crore for the year 2012, ended December 31, producing fictitious accounts.
But, the reality is that the bank has incurred a net loss of Tk 1185.06 crore instead of the profit.
The bank did not abide by the central bank’s set provisioning guidelines and keep the required provisioning amount of Tk 1719.66 crore against its all account during the year 2012.
“The profit was calculated without keeping required provisioning against its classified loan, investment and provisioning against the central bank’s prescribed rate,” added the report.
During the year 2012, the Bangladesh Bank (BB) report found, the required provisioning against the classified loan was Tk 1172.46 crore and an amount of Tk 2888.57 crore calculated provisioning was to be maintained against the central bank
for the classified loan.
That means, the bank has a net shortfall of Tk 1672.11 crore provisioning against its classified loan during the year.
The BB report mentioned that the bank has shown the operating profit without deducting Amortization of Value Adjustment of Tk 132.95 crore, Tk 489.06 crore provisioning and Tk 158 crore income tax. If the bank deducts the entire amount aggregating Tk 780.01 crore from the bank’s balance-sheet the net profit of the bank will stand at Tk 534.60 crore.
And once the amount (Tk 534.60 crore) adjusted with the provisioning shortfall (Tk 1719.66 crore) the bank account would show Tk 1185.06 crore net loss during the year 2012, the report added.
At the same time, the bank posted a net profit of Tk 1199.35 without deducting Tk 132.95 crore Amortization Amount and Tk 753.84 crore Asset Revaluation Reserve of from its operating profit.  Of which (Tk 753.84 crore) Tk 664.75 crore was shown as income account.
Besides, the BB investigation found irregularities in various accounts of the bank including statement in classified loan, capital requirement and asset re-valuation.
While calculating its eligible capital, the bank has accounted a retain earnings of Tk 1329.59 crore without deducting value asset loss of Tk 664.84 crore and added an additional Tk 664.75 crore violating the BRPD circular 09 issued on December 31, 2008. “The bank should actually show a net loss instead of a profit in its un-audited financial statements (December 31, 2012),” a senior BB official told The New Nation on condition on anonymity. He added, “The bank has shown the exorbitant profit during the year through massive manipulation in its accounts.”     “We have issued a warning letter to the authorities of the bank asking them to make necessary correction on its balance-sheet,” he noted.
The central banker further said that authorities of the bank have been asked the authorities of the bank to complete all the corrections before finalising their audited financial statement for 2012. “The BB’s inspection team has discussed the matter with the high official of the Agrani Bank and its external audit team twice. And they had agreed upon on the irregularities that detected by our team,” he mentioned.
Showing inflated profits and transactions, less provisioning and over valuating   of assets and investment by a commercial bank is an absolute violation of the banking rules and for doing such wrongdoings a bank can face the central bank’s backlash, he said. “We ordered the bank to clarify its position and explain as to why enforcement action should not be taken against it,” he warned. Syed Abdul Hamid, Managing Director and Chief Operating Officer of Agrani Bank, could not be reached for his comment despite several attempts on his cell phone.

Source: The New Nation

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