Beximco's borrowing leaves Janata bank in crisis

State-owned Janata Bank failed to enforce lending rules in the case of Beximco Group, one of the largest conglomerates in Bangladesh, led by Salman F Rahman. This has left Janata Bank in a precarious financial position, with about 49 percent of its outstanding loans having gone bad—37.5 percent of which are attributed to Beximco Group. Salman, who was recently put on ten-day remand, was the private industry and investment affairs adviser to former prime minister Sheikh Hasina, holding the rank of a minister.

As of June, Janata's total exposure to Beximco Group was Tk 25,000 crore, which is about 950 percent of the bank's paid-up capital of Tk 2,314 crore. Banks are typically not allowed to lend more than 25 percent of their paid-up capital to a single party. Additionally, 72 percent of Beximco's outstanding loans with Janata have defaulted.
Janata Bank's total disbursed loans amount to Tk 98,000 crore, with 25.51 percent given to 30 companies under the Beximco umbrella. Of these, 26 companies breached the single borrower exposure limit. Salman, who served as a member of parliament from 2018 until the dissolution of the 12th parliament on August 6, secured large volumes of loans with the help of the Janata board and central bank officials, bypassing banking regulations.
The loans to Beximco have increased significantly over the last three years, from Tk 2,045 crore in 2015 to Tk 6,400 crore in 2020, and reaching Tk 25,000 crore by the end of June. Between July 2021 and July 2022, Beximco opened nine new companies, and in one month of 2022, it created eight new companies and availed loans in their names.
Salman used his influence in the Sheikh Hasina administration to obtain special approvals for large loans from the central bank. For example, on August 1 last year, the Bangladesh Bank issued a no-objection certificate to extend loans amounting to Tk 479 crore to Beximco, despite violating Janata's single borrower exposure limit. This exemption was granted by then-governor Abdur Rouf Talukder, despite objections from the Department of Off-Site Supervision, which is responsible for monitoring and regulating banks.
Janata Bank officials indicated that Salman used his political influence to reschedule loans and secure favorable terms, preventing Beximco from being classified as a defaulter. In June 2022 and June last year, Beximco rescheduled a major portion of its loans. However, a fresh rescheduling package proposed at a board meeting on July 30 was not approved, leading to about Tk 18,000 crore of Beximco's loans becoming non-performing.
Of the defaulted loans, Tk 5,030 crore is from the Export Development Fund, which was sourced from the country's foreign currency reserves. Janata Bank's managing director, Md Abdul Jabbar, noted that some loans were approved or extended at the branch level without board approval, with 60 percent of the loans originating from the bank's local office in Dilkusha, Motijheel.
Janata Bank, once a reputable institution, has seen its financial health deteriorate due to a series of loan scandals involving AnonTex and Crescent, among others. By June, its bad loans had ballooned from Tk 5,818 crore in 2017 to Tk 48,000 crore. At the end of June last year, Janata had a capital shortfall of Tk 2,189 crore, according to Bangladesh Bank data.