The Bangladesh Bank has revealed staggering figures concerning Beximco Group’s financial obligations, with total outstanding loans and liabilities amounting to Tk50,098 crore as of 30 November 2024.
Alarmingly, more than 50% of this – Tk25,524 crore — has already been classified as defaulted, while the remaining amount teeters on the brink of being defaulted, said the report submitted before the High Court on Sunday.
The central bank’s report, drawing from Credit Information Bureau (CIB) data submitted by all banks and non-bank financial institutions, starkly warned, “Unless the repayment of instalments is made, the majority of the classified amount shall be defaulted in the near future.”
The report further uncovers an intricate web of financial dealings involving 16 scheduled banks and seven non-bank financial institutions (NBFIs) that extended various credit facilities — loans, advances, letters of credit, and guarantees — to Beximco Group’s companies.
As of 30 September 2024, Janata Bank led the pack, lending to 29 companies under the conglomerate. IFIC Bank where Salman F Rahman, vice chairman of Beximco Group was the chairman, also financed 29 companies, followed by National Bank, which supported nine, Sonali Bank and Agrani Bank each backing four, AB Bank assisting six, and Exim Bank financing five companies.
Other banks were found to have lent to at least one or more Beximco Group entities, found the BB report. It indicates that there might be some “shell companies” which were created only to collect public money as borrowers.
What has raised eyebrows is a troubling trend of deliberate concealment of actual beneficial ownership. The report suggests this practice could facilitate money laundering and tax evasion, both of which run counter to existing laws.
Such actions might have also allowed breaches of the single borrower exposure limit, a critical safeguard prescribed under Section 26Kha of the Bank Companies Act, 1991, according to the report.
The findings also pointed out a systemic issue: a conglomerate accumulating vast sums of credit, while potential regulatory breaches and the risk of default cast a shadow over the financial sector.
The BB revelations, while significant, also raise questions about the role of the lending institutions in monitoring and controlling such high-risk exposures.
Legal proceedings
During a follow-up hearing yesterday regarding a writ petition seeking measures against loan irregularities and the recovery of misappropriated funds allegedly laundered abroad, the High Court division bench of Justice Farah Mahbub and Justice Debasish Roy Chowdhury received the report from the central bank detailing Beximco’s loan irregularities.
Barrister Masood R Sobhan, the petitioner, personally presented arguments in support of the writ. He told The Business Standard that the court expressed “astonishment” at the scale of the loan scandal detailed in the report.
“The High Court directed the petitioner to file a criminal case against the Bangladesh Bank and BFIU officials for their inaction during the incident.
The next hearing is set for 22 January, where Sobhan said he would seek criminal proceedings against officials responsible at the time.
The legal proceedings stem from Sobhan’s writ petition, which led the High Court on 5 September to appoint a receiver for all Beximco entities.
The court also ordered Bangladesh Bank to recover funds allegedly misused by Beximco Pharmaceuticals founder Salman F Rahman and repatriate money sent abroad.
Beximco Pharmaceuticals filed a leave-to-appeal, seeking a stay only on the receiver appointment order.
The Appellate Division resolved the appeal by suspending the receiver’s appointment for Beximco Pharma alone. However, before the appeal was filed, Bangladesh Bank had already appointed receivers for all Beximco entities.
More findings in the report
The central bank report further revealed that out of 188 Beximco Group companies, 78 have taken loans from various banks and financial institutions.
It highlighted that Beximco Group exported products to RR Global Trading, UAE – a sister concern of the group. The Bangladesh Bank raised concerns that overdue export proceeds may have been laundered and are unlikely to be repatriated, as the time stipulated by the Guidelines for Foreign Exchange Transactions has expired.
Addressing loan approval violations, the Bangladesh Bank reported collecting detailed information about irregularities in the loans issued to Beximco Group.
In the report, the central bank said it had instructed the banks involved to take measures against irregularities in extending loans to Beximco companies. However, when the instructions were given was not mentioned.
According to the report, the Bangladesh Bank asked Sonali Bank to take action against employees involved in these irregularities and ensure proper collateral for loans to Beximco Computers.
Padma Bank was asked to explain why loan statuses were altered during the issuance of additional loans.
The central bank also directed Janata Bank to scrutinise inflated production figures of certain companies and sought clarification from Rupali Bank regarding its breach of the single borrower exposure limit.
Besides, Janata Bank had been asked to explain the non-repatriation of export proceeds amounting to Tk5,827.97 crore. The central bank also informed BFIU to investigate possible money laundering offences.
The BB instructed National Bank Limited to classify the loans issued to Independent Television and GMG Airlines. It also sought an explanation for why GMG Airlines’ shares were presented as securities despite already being pledged as collateral for another company’s loan.
IFIC Bank was instructed to classify loans of various Beximco entities and penalise employees for failing to comply with the BRPD Circular No. 4 of 2016, neglecting Customer Due Diligence (CDD), and improperly utilising public funds.
The Bangladesh Bank referred the IFIC Bank’s matter to the Anti-Corruption Commission for further investigation and legal action.
Regarding BFIU’s role, the report said Circular 26, issued on 16 June 2020, which mandated all scheduled banks to perform CDD to identify actual borrowers and beneficiaries, especially for loans involving politically exposed persons.
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