Abdur Rahman (not real name), a retired employee of a private company, made a fixed term deposit of Tk19 lakh with International Leasing and Financial Services Limited (ILFSL) three years ago. Now, even though his account has reached maturity, he is unable to withdraw his money.

Rokhsana Akter (not real name) is another depositor who is also facing the same problem. Her fixed deposit account has reached maturity too, but the non-bank financial institution (NBFI) is incapable of paying her back.

Not only these two people but many other institutional and individual depositors have expressed frustration in talking to Dhaka Tribune, as they are also not getting their money back from NBFIs which are struggling after suffering a major scandal that came to light recently.

In 1996, ILFSL had registered as a public limited company and was licenced by Bangladesh Bank as a NBFI on February 19 that year.

Until 2015, the company was doing well, but since then its condition started worsening, according to an ILFSL financial statement.

ILFSL’s net profit was at Tk12.25 crore in 2015 and Tk11.42 crore in 2016. But last year, the company books went into the red.

By the end of December 2019, according to their financial statement, the NBFI’s loss stood at Tk41.42 crore.

Embezzlement by directors and shareholders, violation of company rules, massive irregularities in approving loans, lack of internal control and compliance has turned ILFSL into an ailing NBFI, said a central bank high official.

The company’s non-performing loans (NPLs) were at Tk139.70 crore, or 6.89% of the total outstanding loans in 2015, according to central bank data.

However, at the end of 2019, its NPLs stood at Tk957.14 crore, or 24.57% of the total outstanding loans.

At the end of December last year, total loans granted by ILFSL stood at Tk3,895.64 crore against a total deposit of Tk2,767.66 crore, of which Tk543.67 crore was from individual deposits, according to an ILFSL financial statement.

The company also faced Tk450.19 crore in capital shortfalls.

What happened?

A Bangladesh Bank special investigation has found that Tk1,596.14 crore was transferred from ILFSL between 2015 and 2019 as loans, in violation of company rules and regulations, through 48 accounts of various companies and firms where a number of the NBFI’s directors and shareholders have stakes.

Another Bangladesh Financial Intelligence Unit (BFIU) investigation has also made a similar discovery. Its report said the company’s board of directors, chief executive, executive committee, audit Committee, risk management department, and internal control department were jointly responsible for these irregularities.

Fraudulent businessman Proshanta Kumar Halder — who controlled the company’s majority shares after buying them under names of different individuals, including his family members, was directly involved in this embezzlement, according to the central bank probe report.

Also known as PK Halder, the man is the former managing director of Reliance Finance and NRB Global Bank. He had also taken control of a number of similar NBFIs alongside ILFSL several years ago.

According to media reports, he is now in Canada, after managing to embezzle about Tk3,500 crore from these companies and fleeing the country. The Anti-Corruption Commission has already started a case against him for amassing illegal wealth.

Of the loans, the central bank report said, ILFSL had approved Tk281 crore alone, by violating rules, to firms/companies where its directors Bashudeb Banerjee and Nowsherul Islam have stakes.

It added that the companies and firms that received such loans include P and L Ltd, Nutrical Ltd, Drinan Apparels Ltd, Anan Chemical Industries Ltd, Sukhada Properties Ltd, Okayama Ltd, G and G Enterprise Ltd, Reptiles Farm Ltd, MTB Marine Ltd, and MST Pharma and Healthcare Ltd.

Most of these companies, some of which are also fake, were owned by PK Halder.

HC intervenes

On January 22 this year, after hearing a writ petition, the High Court removed MA Hashem as chairman of ILFSL, and replaced him with former Bangladesh Bank deputy governor Khondkar Ibrahim Khaled in an effort to revive the ailing NBFI.

However, Khaled resigned after a little over one month. He told Dhaka Tribune that he sent his resignation letter to the ILFSL board of directors, Bangladesh Bank, and the High Court last Sunday.

He said he found it difficult to rejuvenate the company since most of the loans were approved by violating rules and regulations and such loans were unlikely to be repaid. “Besides, my physical condition is not well,” he added.

The court has also imposed a foreign travel ban on all shareholder-directors and top executives of the company and ordered a freeze of their bank accounts and all types of assets.

These officials included Hashem, Bashudeb, Nowsherul, ILFSL director Nurul Alam, independent directors Zahirul Alam, Nasim Anwar, Papia Banarjee, Momtaz Begum, Anwarul Kabir, Mohammad Nuruzzaman, managing director Rashedul Haque, and PK Halder and his relatives — including his mother Lilaboti Halder, brother Pritish Kumar Halder, wife Susmita Saha, and cousins Amitav Adhikari, and Avijit Adhikari.

Former Bank Asia Ltd managing director Erfanuddin Ahmed and one Uzzal Kumar Nondi are also under the watch of concerned authorities.

Barrister ASM Shahriar Kabir, who represented the seven petitioners, said his clients had kept Tk8.5 crore in ILFSL as fixed deposits.

After the accounts reached maturity, they applied to withdraw the money, but the company informed them of their inability to pay, he said. Afterwards, the depositors moved the court in December 2019, seeking ILFSL’s liquidation.

On February 26, the Supreme Court upheld the High Court’s orders.

Liquidation or reconstruction?

The government has recently decided to liquidate People’s Leasing and Financial Services (PLFS) on account of their bad financial health, which was creating a huge negative impact on the sector, said a senior Bangladesh Bank official.

Requesting anonymity, the official added: “But liquidation will not be the appropriate decision for ILFSL. If ILFSL is liquidated, the financial sector may just collapse.”

Khondkar Ibrahim Khaled had made the same observation during a hearing at the Supreme Court last month.

He also told the court: “PK Halder and some other persons took Tk1,596 crore from this company, but no one knows where the money is now. There is hardly any chance that we will get the money back.”

The central bank investigation team has recommended removing the current Board of Directors and management team of ILFSL and appointing new directors and a new team.

Bangladesh Bank Executive Director Md Shah Alam had also told the Supreme Court last month that it was possible to reconstruct ILFSL.

Khaled opposed the idea, saying it would be difficult for them to reconstruct the company. “But only Bangladesh Bank can do something in this regard.”

It’s been found that ILFSL MD Rashedul Haque has stopped going to work, leaving chief financial officer Syed Abed Hasan to perform as the acting MD.

“Our MD is on medical leave,” Abed told Dhaka Tribune. “We are now trying to unfreeze the directors’ bank accounts.

“If we manage to do that, we will be able to start paying back the depositors.”

Before his resignation last Sunday, Khondkar Ibrahim Khaled told Dhaka Tribune that he was holding meetings with the management team and they were looking for a new MD. After appointing the MD, they would start addressing other issues.

The central bank’s Executive Director and spokesperson Md Serajul Islam declined to comment on the matter.

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