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Move to rescue Janata Bank

Emergency healing package on cards

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Special Correspondent :
The Financial Institutions Division (FID) under the Ministry of Finance calls a meeting on Sunday for discussing urgent package for healing of Janata Bank in the backdrop of sharp decline in its key financial indicators.
Janata Bank Limited (JBL), the second biggest state lender, experienced massive loan scams involving Tk 11,700 crore since 2012, leading it to endure a severe liquidity crisis.
The bank recently hogged media headlines due to AnnonTex (Tk 5,000 crore) and Crescent Group (Tk 5,500 crore) loan scandals.
In case of AnonTex, loans were given breaching credit rules. Even new loans were sanctioned to the company though it failed to repay previous loans. Loans were given to Crescent Group against export bills resorting to massive irregularities.

Many bank officials, from top executive to branch managers, got involved in the irregularities while sanctioning those loans, according to a central bank report.
Officials said the key financial indicators of Janata Bank keep nose-diving following indiscriminate lending, loan scams and soaring defaulted loans.
They said Janata's defaulted loans soared to Tk 9,879 crore or 22 per cent of its overall credit portfolio and capital shortfall stood at Tk 2,195 crore as of June this year.
Out of the total amount, Crescent Group alone has Tk 3,443 crore in defaulted loans while AnonTex has defaulted on loans of Tk 557 crore as on June this year.
To recover the defaulted loans, Janata recently put for auction of mortgaged properties of five firms of Crescent Group through floating media advertisements.
The state-run bank allegedly sanctioned a huge amount of the loan even knowing that those loans would turn classified. A group of bank officials got involved in irregularities while sanctioning those loans.
 "The meeting has been convened amid dramatic fall of the bank's key performance indicators," a FID official told The New Nation yesterday without giving further details.
Md Fazlul Haque, Additional Secretary of FID will preside over the meeting to be held at 3.30pm in the conference room of the Finance Ministry.
Senior officials of Bangladesh Bank, Bangladesh Financial Intelligence Unit (BFIU) and Managing Director of JBL have been asked to attend the meeting.
"The meeting would discuss a host of issues, including credit growth, bad loan situation, loan recovery mechanism and risk management issues. The meeting is expected to devise a 'prompt corrective action framework' to check the bank's deteriorating financial health," an anonymous source of FID told The New Nation on Saturday.
He said bank officials should be held accountable for their failure to prevent the bank from the dramatic fall.
JBL booked Tk 1,600 crore loss in the first half of this year. But officials said the loss amount could be larger second half of the current calendar due to restructuring of huge volume of defaulted loans.
They said a large share of the restructured loan is expected to turn bad debt in the coming quarters and it would therefore amplify the loss amount.
Janata's capital adequacy ratio (CAR) came down to 5.53 per cent in June this year from 10.69 per cent (one and a half years ago), reaching much below the central bank's benchmark of 11.81 per cent.
Even the bank lost deposits of over Tk 3,000 crore since the implementation of a government decision to set the interest rate for lending at nine per cent and deposit at six per cent.
Md Abdus Salam Azad, Managing Director of the bank, could not be reached for comments despite several attempts on his cell phone.
"Not only Janata Bank but also other public banks and even the whole banking sector has been marred by scandals and bad debts. The situation threatens to have repercussions on the broader economy," Dr Salehuddin Ahmed, former Bangladesh Bank (BB) Governor told The New Nation yesterday.
He said there has been a string of loan scandals surfaced over the last couple of years, hurting the image of banks.
 "Bad governance, corruption and poor risk management are mainly responsible for the dire health of the state-owned banks. Only the government's strong 'political will' can put them on the right track as well as restore discipline in the banking sector."
 "Affairs of Janata Banks deserve serious attention of the government and the central bank. The government and the regulator should ensure proper supervision of the bank to save the bank from collapse." Dr Khandoker Ibrahim Khaled, a former BB Deputy Governor told The New Nation.
He said mismanagement and corruption are mainly responsible for the present situation of Janata Bank.

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