State owned banks need credible protection

He is accused of approving loans of over Tk 792 crore to several business firms without approval of the board or misusing his power and sidetracking the board. The new disclosure   surfaced at a time when the state owned banking sector is going through hard time to restore discipline in other scam-hit banks like Sonali Bank and BASIC, requiring the government to provide them with regular working capital through recapitalization programme under the annual budget.

This time the loan scams at Agrani Bank came to the fore raising questions why the government and particularly Bangladesh Bank is not plugging all loopholes to stop the recurrence of high profile robberies of bank money orchestrated by powerful people under the cover of business loans.

There are allegations that the bank approved loans to Sun Moon Group, Tanaka Tradecom International, Jaj Bhuiyan Group and BTL Group violating standard rules for collaterals and these loans have already turned bad loans with hardly any means of their recovery.

It appears that the Banking Division has called for an audit into a state owned bank for the third time now after similar audits were carried out in Sonali Bank and BASIC Bank to identify the extent of total fraud. They have been asked to submit their reports in two months.

Agrani Bank Chairman Zaid Bakht confirmed that they have received such a directive and will appoint two audit firms soon. Bangladesh Bank has also served notice on Agrani Bank Managing Director last month seeking explanations against the reported irregularities.

Earlier the central bank inspection team unearthed the irregularities in loan operation from Agrani Bank’s main branch in Dhaka city and at the Asadganj and Laldighi East branches in Chittagong port city.

Allegations blamed Hamid for approving loans by violating the directives of the central bank and the Agrani’s  board of directors. In 2011, he extended Tk 120 crore loan to Tanaka Tradecom International from the bank’s main branch. The loan was approved by Agrani’s board with the condition that supplementary collateral will be kept as security with the bank. Tanaka Tradecom later proposed changes to the condition, which Hamid approved without the consent of the board.

Later in 2015, he rescheduled loans of the company amounting to Tk 10.79 crore — a decision he was not authorised to make. Serious irregularities were also committed in disbursing loans to Mizanur Rahman Mizan, a customer of Agrani’s main branch, and various companies linked to his Sun Moon Group which later bought out a Bengali Bank and unsuccessfully attempted to bring out an English daily. It is murmured that a powerful adviser to the government prompted the irregular disbursements. The outstanding loans now stand at Tk 300 crore.

Irregularities were also reported in loans extended to Zaynab Trading of Chittagong. The central bank inspection further found that a huge amounts in loans were extended to a company in Chittagong at a time when its address was not found. Hamid rescheduled a Tk 42.38 crore fund for Muhib Steel & Ship Recycling Industries that was classified as bad debt. He did so without the approval of the board, and Muhib Steel’s letters of credit facility was allowed to accrue liabilities reaching a total outstanding of Tk 91.93 crore. Two bank officials involved with these loans have been suspended, and instructions have been issued to file criminal cases against the officials and the borrowers.

The Finance Minister told parliament last week that 27 BASIC Bank officials were instrumental to removing over TK 4500 crore from the bank under various fake trade documents and business projects.

He squarely blamed the then chairman of the bank Abdul Hye Bachhu for facilitating the swindling of the bank money. He did not, however, say why he had favoured approval and renewal of had revealed and identified Abdul Hye’s involvement in term in the board at least twice when news reports were highly critical of his loan scams one after.

The Finance Minister said a total of 56 business firms took away the money over few years and in many cases they set up fake business firms overnight to apply for loans and remove the money. The whereabouts of many such organizations are not traceable.

He further said eight surveyor organisations were involved in the much-talked-about the loan scam of the Bank, whose auditors systematically protected the swindles in cover up service in the name of audit.

Earlier, Sonali Bank was also robbed during the same period by several big business houses and an adviser to the Prime Minister reportedly had his hands behind one of the biggest scams involving over Tk 3,500 crore. The Hall-Mark group withdrew the money from a single branch of the bank in the city over few years and the board of the bank approved the loans under fake import documents and business projects.

What is remarkable is that the government has failed to recover any money from Hall-Mark group, and many believe that some top officials of the group including its chairman and managing director are facing, prosecution which is designed to be an eye wash.

The Finance ministry so far failed to take any disciplinary action against the bank directors and chairman – who approved the fake loans and escaped without being held accountable for collaborating with the crime. Only some Sonali Bank officials are facing charges while directors are enjoying impunity despite their known involvement in the approval of those fictitious loans.

A factor in such total mismanagement of the country’s banking sector is that while the central bank is supposed to have its autonomy to regulate all banks, the Banking Division of the government remains effectively in charge of SOB’s.

As a result, superiors in the government dictate the state owned banks directly or through the Banking Division to offer loans to business parties who are cronies of high-ups of or to reschedule big loans of big business houses that are in good books of ruling party leaders.

Swindling of Sonali bank and BASIC Bank and such other loans scams took place when regulators allowed safe corridor for it to happen. The Finance Minister’s account of BASIC Bank’s scandals bears out the truth.