Pubali Bank sues BIFC over default loan

FT ONLINE

Pubali Bank Limited has turned to Artha Rin Adalat (Money Loan Court) to recover the default loan from the Bangladesh Industrial Finance Company Limited, a non-bank financial institution.

The bank recently filed a lawsuit against the defaulting financial institution with the court to this effect.

Taking the matter into cognisance, the Money Loan Court has directed the industrial finance company to give its opinion by January 9 next year.

Earlier, the Bangladesh Industrial Finance Company had taken out Tk10 crore in loan from Pubali Bank's principal branch to repay its dues to other institutions.

But the company has not paid any installment on the loan and has defaulted on the entire amount.

The loan plus its interest amounted to Tk12.55 crore till October 20, this year.

On condition of anonymity, a high official of Pubali Bank's principal branch said the bank has sent several letters to the financial institution asking for a repayment of the loan but is yet to get a reply.

The officials of the company have not contacted the bank either.

M Mostafa Bilal, acting managing director of the Bangladesh Industrial Finance Company, said that the company has not had enough money to repay the loan.

Company owes Tk344 crore in loans to 15 more banks

Fifteen more banks are also currently finding it very tough to realise loans they earlier gave to the problem-ridden financial institution.

The company has neither repaid short-term deposits nor long-term ones and call money – amounting to Tk344 crore – to the banks till date.

The banks are now not being able to find any way of recovering their money, even after lodging complaints with Bangladesh Bank.

The Bangladesh Industrial Finance Company has defaulted on what is clearly the highest amount of Tk50 crore with Rupali Bank, Tk30 crore with Sonali Bank, Tk29 crore with Agrani Bank, Tk30 crore with BASIC Bank and Tk21 crore with Bangladesh Development Bank Limited.

The company owes Tk47 crore to Mercantile Bank, Tk32 crore to Uttara Bank, Tk35 crore to Dutch-Bangla Bank, Tk23 crore to Shahjalal Islami Bank, Tk10 crore to Social Islami Bank, Tk8 crore to Standard Bank, Tk6 crore to NRB Commercial Bank, Tk8 crore to National Bank, Tk10 crore to Mutual Trust Bank and Tk5 crore to Dhaka Bank.

Its managing director said all the banks have filed separate cases against the non-bank financial institution as the latter did not repay the loans.

The financial institution has been trying to collect money from alternative sources to repay the banks, he added.

Alternative way to collect money

The company wants to give shares to clients to overcome the financial crisis as well as to pay its dues to the banks and its depositors.

The company's board of directors took the decision in April this year.

The financial institution has submitted a written proposal, seeking permission from the Bangladesh Bank to this effect.

The company has sought approval from the central bank to give its shares to the lender organisations against at least 50 percent of their deposited money. It has also proposed keeping their representatives on its board of directors.

The company's managing director said no directive has come yet from the central bank in this regard.

Company on the verge of bankruptcy

Some 93 percent of the loans, disbursed by the Bangladesh Industrial Finance Company as of September this year, have become defaulted.

In 2018, the outstanding loan was Tk1,300 crore and 96 percent of it was defaulted on, as per Bangladesh Bank data.

The amount of loans to different organisations of Sunman Group, owned by the company's former chairman Major (retd) Abdul Mannan, stood at Tk1,000 crore, and the entire amount was defaulted on, according to an investigation carried out by the Bangladesh Bank in 2015.

He had taken the loan by violating rules. Some 30 cases have been filed against Sunman Group as measures aimed at recovering the amount.

Bangladesh Bank dissolved the company's board of directors in 2016 on grounds of loan forgery. The central bank then wanted to liquidate the organisation in 2017. But the decision was not implemented.

The company is now finding it difficult to manage its office owing to the fund crisis.

The acting managing director said the company has been realising money from small loan defaulters, which is being used to run the office. But no money has been realised from the big loan defaulters.

He also said if the big loan defaulters do not pay back the money in the next few months, there will be no money left to run the office. There will then be no other way but to liquidate the company to pay the money to the depositors and the banks.

The company requires a total of Tk250 crore to overcome this stalemate.

The managing director said if the money is collected, the organisation can make a turn-around.

Present financial status

The company's business has faced major setbacks because of its financial crisis, caused by irregularities committed by the former chairman of the organisation.

The company, which made Tk5.52 crore net profit in 2014, has been counting big losses regularly for the last four years. During the period, the company suffered Tk70 crore losses on average.

In the first nine months (January-September) of the current fiscal year, the company's net loss was Tk48.26 crore. During this period, the company's total debt stood at Tk967 crore.

On December 31, 2018, the financial institute's net loss was Tk131 crore.

The company last handed out dividends to its shareholders in 2013.

Share performance

The closing price of the company's shares in Dhaka Stock Exchange on Thursday was Tk2.60.

In the last one year, the highest price of its share was Tk8.10 and the lowest was Tk2.10.

The company was enlisted with the share market in 2006. Its total accumulated loss is Tk769.20 crore.

The company's present paid-up capital is Tk100 crore. Sponsor directors have a 34.73 percent stake in the company while institutional and general investors have 47.60 percent and 17.67 percent shares respectively.