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10th-Sep-2018

Anarchy in loan management in Janata Bank

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NEWS media reported that Janata Bank deliberately did not mark Tk 2,643 crore of its Tk 5,508 crore loans given to the AnonTex Group by ignoring the central bank's directives to mark the Group classified. But Janata Bank defied repeated instructions from the central bank to classify the loans. The central bank had first asked Janata Bank to classify AnonTex's loans by May this year as the Group didn't pay installments regularly. The deliberate hiding of loans becoming classified is worrisome as it is destroying the financial discipline of Janata Bank, while having negative implications on the balance sheet because of the mandatory obligation of provisioning any classified loan.
 If a business group's loan is classified, it cannot get further loans, for that reason Janata Bank declined to mark the Group classified. Janata Bank is allowed to lend up to 10 percent of its capital or Tk 423 crore to a single borrower as of December last year, but the bank lent 13 times the limit. The situation is such that the AnonTex's loans are posing a serious threat to the bank's survival. The bank has been at the centre of such dubious activities for quite some time, which have led to a drastic deterioration in its health. The BB last year detected another loan scandal at Janata's Imamganj Corporate Branch that gave 98.4 percent of its total loans to one client, Crescent Group. Beximco was another group for which Janata Bank faced a fine of Tk 10 lakh from the BB in May this year for providing undue facilities.
 Though AnonTex couldn't repay installments regularly and failed to complete most of its projects within the scheduled time, Janata's board approved further loans of Tk 150 crore for the Group in December last year. The board also allowed the Group to have its loans rescheduled several times. The state-owned bank sent rescheduling proposals to the BB, hiding the overall loan status of the Group. The bank faced a capital shortfall of Tk 161.48 crore in December last year whereas it had a surplus of Tk 278 crore in the same month of the previous year. Its defaulted loans went up to Tk 9,702 crore in March this year from Tk 5,818 crore in December last year. The bank also saw a sharp decline in net profit to Tk 96.77 crore last year from Tk 260.55 crore in the previous year.
 As no administrative or judicial action was taken against the recent past loan scams in the country unscrupulous businesses comprehend that irregularities can be carried out, thus the banks can continue with the blessing of the ruling high-ups. This anarchy in the banking sector must be stopped as the ordinary people are the owners of public banks and on behalf of the people, the government is responsible for ensuring its security.