Home Today's Paper Most Popular Video Gallery Photo Gallery
Subscription Blog Signin Register
Logo
Wednesday, February 26, 2020 11:27:01 PM
Follow Us On: Facebook Twitter Twitter Twitter Twitter

Connected lending makes banking sector vulnerable

Directors take away Tk 1,75,000 crore from banks

By Special Correspondent
27th-Feb-2020       
Share
  • Twitter
  • Google+
  • Save
  • E-mail
  • Print
Comments
Share your thought
Post a comment »
Read all () »

Directors of commercial banks have resorted to a massive connected lending making things even worse for the country's ailing banking sector, sources said.
They borrowed nearly Tk 1,75,000 crore from each other's banks till September 30 last year, shows a Bangladesh Bank (BB) data.
Banking analysts expressed serious concern over the growing trend of insiders' loan saying such practice must be stopped immediately to maintain stability in the country's financial system as well as save the banks from future shocks.
The BB also figure shows, the country's commercial banks have altogether disbursed Tk 9,00,700 crore loans as on September last year and the amount of connected lending accounted for 12 per of the total outstanding loans in banks.
Islami Bank Bangladesh Limited tops the list of connected lending granting Tk 19,175 crore loans to bank directors followed by Exim Bank Tk 10,513 crore, Jatata Bank Tk 10,126 crore, Pubali Bank Tk 9,735 crore, United Commercial Bank Limited Tk 6,945 crore, Prime Bank Tk 6,540 crore, Shahjalal Bank Tk 6,301 crore, Dhaka Bank Tk 6,008 crore, SIBL Tk 5,103 crore and Southeast Bank Tk 4,889 crore, National Bank Limited Tk 4489 crore, Mercantile Bank Tk 4,456 crore, DBBL Tk 4294 crore, Jamuna Bank Tk 4,369 crore,   City Bank Tk  3,970 crore, AB Bank Tk 3,305 crore, Eastern Bank Tk 3,432 crore, NCC Bank Tk 3614 crore, Standard Bank Tk 3,520 crore, MTBL Tk 3,737 crore, Premier Bank Tk 3,049 crore, Fist Security Islami Bank Tk 3,015 crore, Al Arafa Islami Bank Tk 2,363 crore, One Bank Tk 2,436 crore and BRAC Bank Tk 2,205 crore.
Among all fourth generation scheduled Bank, NRB Commercial Bank granted Tk 1,090 crore loans to bank directors, Union Bank Tk 917 crore, NRB Global Tk 915 crore, Modhumoti Bank Tk 910 crore, South Bangla Agriculture and Commerce Bank Tk 630 crore, Meghna Bank Tk 461 crore, Midland Bank Tk 633 crore NBR Bank Tk 459 crore and Padma Bank Tk 77 crore.
Commenting on the issue, former BB Governor Dr Salehuddin Ahmed said, "Bank directors are largely involved in connected lending due to lack of corporate governance in banks. This shady lending practice is abruptly going on even after the prevalent crisis in banking sector surrounding big loan scams and high volume of non-performing loans."
He observed that directors of private have mainly involved in connected lending using their influence.
"It is a matter of concern that bank directors are taking away big fund but do not bother to repay. It will spread a contagion across the financial system unless the central bank step up preventive measures," said Dr Salehuddin Ahmed, adding, "Public trust in the banks will erode further in case of failure to rein in the growing insiders' lending."   
The existing rules permit directors to borrow sums not exceeding 50 per cent of the value of his or her stake in the bank. But the reality is a bank director borrows unlimited sums from another bank under mutual understanding and thus ultimately making concentration of capital in their hands.
Alarmed by the situation, Dr Salehuddin Ahmed asked the central bank authorities to formulate a certain guideline so that banks should not grant any loan, advance or non-fund-based facility or any other financial accommodation to its directors or their relatives.
"It is key to uphold the interest of shareholders and depositors," he added.
Sources in the central bank said, directors of private banks have invested Tk 6,000 crore to hold their shares, while they have already taken away Tk 1,75,000 crore through connected lending. This loan was concentrated mostly among 300 directors.
"Bank directors invested maximum Tk 20 crore to become directors but took away big funds through the unfair practice," an anonymous BB official told The New Nation.
Currently, the banking sector comprises with 10.05 crore depositors, 1.10 crore borrowers and 800 bank directors.
"Connected lending among the promoters and directors of different banks pose a serious threat to banking industry. BB should ensure transparency in such lending to protect interest of the depositors," said former finance adviser to the caretaker government Dr AB Mirza Azizul Islam.
He noted insiders lending should be stopped when risk remain high in the process.  Otherwise, it could lead to further increase in non-performing loans in banks endangering stability in the whole financial sector.
Mirza Aziz further said that connected lending demands an extensive scrutiny from the central bank, but the banking regulator is yet to come out with the move, creating an uncertainty over the banking sector.     
"Banks should not grant loans to its directors or their relatives and also to firms in which directors have interests to maintain their good financial health," former BB Deputy Governor Dr Khondoker Ibrahim Khaled told The New Nation.
He opined, "This lending practice should come under intense scrutiny to ensure transparency and mitigate risks in the operation of banks. BB should closely monitor the issue. Otherwise, banks will face a serious crisis as result of big cash out."

Tariff
Add Rate

News Archive

Inside The New Nation

Entertainment »

Nishita always keeps requests from audience


Entertainment Report :While performing in stage shows popular singer Nishita Barua always got requests from the audience to render her popular original song titled Bondhu Tomai Mone Pore and she also kept their requests. It is Nishita-rendered her most popular song. This time another two songs of her includes in ...

International »

Turkey, Russia to hold more talks to reduce Syria tensions


AP, Ankara :Turkey's president announced Tuesday that a Russian delegation would arrive the following day to resume talks aimed at easing tensions in northwestern Syria. He also said no consensus was reached for a four-way meeting next month between the leaders of France, German, Russia and Turkey.However, Recep Tayyip Erdogan ...

Cricket »

Victory against Zimbabwe to bolster Bangladesh for Pakistan Test


After getting a much-needed victory in the form of an innings and 106-run in one-off Test over Zimbabwe, which ended their disappointing six-match losing streak in the longer version format, Bangladesh is oozing with confidence to do well against Pakistan.The Tigers will go to Pakistan for the third and final ...

Sports »

Djokovic sizzles into Dubai second round


AFP, Dubai :Novak Djokovic continued his hot early season form on Monday, cruising past Tunisian wild card Malek Jaziri 6-1, 6-2 into the second round of the Dubai Championships.The top seed and four-time champion made short work of Jaziri, who is ranked 260 in the world.Djokovic owns a perfect 14-0 ...

City »

Executive Director of the Transparency International Bangladesh Dr. Iftekharuzzaman speaking at a prèss conference on 'Unveiling of Information of Follow-up Research on the Anti Corruption Commission' organised by TIB at MIDAS Center in the city on Tuesday.


Editorial »

Rape incidents increasing when all preventive measures failed


A total of 59 women were raped and sexually harassed on public transport across the country in 2019. There were 52 incidents of women repression on public modes of transportation -- 44 on the roads and four each on rail and river ways, the media reported quoting the survey report ...

Entertainment »

Darshana’s new film Protighat


Model-actress, Darshana Banik, who has acted in some critically acclaimed films, both in the South industry and in Tollywood, is on cloud nine now. She will soon be seen in Rajiv Biswas’ upcoming film Protighat which also stars Soham and Priyanka Sarkar in lead roles. The film is a passionate ...

Business & Economy »

Abu Hena Mohammad Razi Hasan, Head of Bangladesh Financial Intelligence Unit (BFIU), speaking at money laundering prevention conference at local resort in Habiganj recently. Bangladesh Bank Executive Directors Kazi Enayet and Iskander Mia, among others, were present.


.

Cricket »

New Zealand beat India by 10 wickets in series-opening Test


AP, Wellington :New Zealand beat top-ranked India by 10 wickets in the series-opening match, posting its 100th win in Tests and inflicting India's first loss in eight matches in the ICC Test Championship.India started play Monday at 144-4, 39 runs behind New Zealand after trailing by 183 on the first ...

Football »

New Zealand fraud probe into ex-Oceania Football chief


AFP, Wellington :New Zealand's Serious Fraud Office said Monday it is investigating former Oceania Football Confederation employees - including ex-president David Chung - after a complaint from FIFA.Authorities will probe whether any criminal activity had taken place, but declined to provide further details of an active investigation."An investigation relating to ...

City »

Former Adviser to the Caretaker Government M Hafiz Uddin Ahmed speaking at a prèss conference on 'Presentation of Information of the Winners of DSCC and DNCC Elections-2020 and Election Evaluation' organised by SUJAN in DRU auditorium on Monday.


Football »

Ronaldo marks 1,000th game with record-equalling goal


AFP, Rome :Cristiano Ronaldo scored for a record-equalling 11th consecutive Serie A game in his 1,000th professional match as Juventus extended their league lead on Saturday with a 2-1 win over basement club SPAL.The 35-year-old tapped in six minutes before the break to equal the mark held by Gabriel Batistuta ...

Editorial »

We don't need experts to tell us banking sector is ruined


 AS Bangladesh Bank has miserably failed to function properly, the country's banking sector is heading towards a total collapse and is being held hostage by a few individuals and entities. This remark comes from the local think-tank Centre for Policy Dialogue on Saturday marking the government's move for appointing a ...

Entertainment »

Kirti Kulhari skips cab and takes auto-rickshaw


Mission Mangal actor Kirti Kulhari was spotted taking a rickshaw ride in the city. The actor who prefers to take auto to travel for short distances was quite happy as she posted on Instagram “When all the ubers and the olas of the world leave u stranded, it's the Rickshaws ...

International »

UN chief urges new transit point for aid to Syria


AFP, United Nations :UN Secretary- General Antonio Guterres has urged the Security Council to authorize a new passage point on the Turkish border to allow humanitarian aid to reach the embattled population of northeast Syria, where medical supplies are running short.The recommendation came in a report issued Friday to Council ...

 
Items that you save may be read at any time on your computer, iPad, iPhone or Android devices.
 
Are you new to our website? Do you have already an account at our website?
Create An Account Log in here
Email this news to a friend or like someone
Email:
Write a comment to this news