BB inspection teams detect
Bangladesh Bank has unearthed fresh defaulted loans of Tk 259.72 crore with a provision shortfall of Tk 1,020.19 crore at state-owned Agrani Bank Ltd.
BB inspection teams found the anomalies when they conducted separate detailed inspections at 10 large branches of the bank between January and February this year on the basis of the bank’s financial report as of December 31, 2014.
A BB official told New Age on Monday that the bank had intentionally hid the defaulted loans and provision shortfall in 2014 to show healthy net profit.
Due to the classified loans unearthed by the central bank, the defaulted loans at the bank stood at Tk 3,965.95 crore in contrast to Tk 3,706.23 crore reported by the bank as of December 31, 2014.
Besides, the bank hid the large amount of provision shortfall amounting to Tk 1,020 crore in last year as it informed the central bank that there was no provision shortfall in the bank.
The BB asked the state-owned bank to calculate the recently unearthed defaulted loans and provision shortfall on the basis of its financial position of last year.
Agrani Bank, however, applied to the central bank on March 16, 2015 seeking a three-year time to keep the provision saying that the bank would face image crisis nationally and globally if it preserved the provision shortfall in the financial statement of 2014.
The 10 branches, where the BB unearthed the defaulted loans, are head office, Amin Court corporate branch, Ramna corporate branch, foreign exchange corporate branch, Bangabandhu Avenue corporate branch in Dhaka, Laldighi east corporate branch, Agrabad corporate branch, commercial area corporate branch in Chittagong, Clay Road corporate branch and Sir Iqbal Roan corporate branch in Khulna.
The defaulted loans of the 10 branches stood at 63.65 per cent or Tk 2,524.58 crore of the total classified loans of Tk 3,965.95 crore at the bank as of December 31, 2014.
According to the BB inspection report, the defaulted loans at the Agrani Bank’s head office stood at Tk 1,193.52 crore as of December 31, 2014, at Amin Court corporate branch Tk 211.58 crore, at Ramna corporate branch Tk 235.45 crore, at foreign exchange corporate branch Tk 203.25 crore and at Bangabandhu Avenue corporate branch Tk 161.50 crore.
The overall defaulted loans at the bank would have increased further in last year if the central bank inspects the rest of the 911 branches of the bank.
According to an Agrani Bank calculation, the defaulted loans at the 911 branches stood at Tk 1,441.37 crore in 2014.
The BB report showed that Agrani Bank had not kept provision Tk 412.86 crore against Tk 300 crore of corporate-guaranteed BEXIMCO Holdings Ltd’s shares which were purchased under sales and buy-back agreements from different companies.
The bank had not kept provision Tk 12.43 crore against debts of IEL, Dutch Bangla Power and Veritus Pharma against preference shares’ dividend.
The bank also did not keep any provision against the defaulted loans which are now considered as regular loans in line with a court order.
But, the central bank earlier asked the bank to keep provision in line with the BB’s circular against the loan as the court did not give any direction to the bank not to keep provision against the loans.
Moreover, the BB asked the bank to keep provision against the recently unearthed defaulted loans of Tk 259.72 crore.
Agrani Bank requested the central bank to allow it keeping the provision by next three years against the defaulted loans.
According to the Agrani Bank letter, the bank wants to keep 20 per cent provision by 2015, 40 per cent by 2016 and 40 per cent by 2017 against the recently unearthed defaulted loans meaning that the bank is trying to avoid keeping any provision in 2014.
Every bank has to keep 20 per cent provision against their classified sub-standard loans, 50 per cent against defaulted doubtful loans, and 100 per cent provision against defaulted bad loans.
Besides, banks have to keep provision between 0.50 per cent and 5 per cent against their regular loans and special mention category loans to ensure a sound financial health.
The Agrani Bank letter said that its net profit would be turned into net loss in 2014 if the bank had to preserve the required provision.
The image of bank will be diminished nationally and internationally due to the net loss that will put an adverse impact on the Agrani Bank’s business operation, the letter said.
The central bank data showed that the provisional net profit of Agrani Bank increased to Tk 376.78 crore in 2014 from Tk 292 crore in 2013.
Banks calculate the net profit by deducting the required provision and corporate tax from the operating profit.
The net profit of Agrani Bank had turned into net loss of Tk 643.22 crore in 2014 if it kept the required provision of Tk 1,020 crore.
Despite repeated attempts, Agrani Bank managing director Syed Abdul Hamid could not be reached for his comments.
Source: New Age
