Beximco's Departure Leaves Janata Bank in a Weak Position
The purpose of a single borrower exposure limit is to prevent a bank's financial stability from being overly dependent on the fortunes of a single conglomerate. However, documents reveal that state-owned Janata Bank did not enforce this rule in the case of Beximco Group, one of the largest conglomerates in the country, led by Salman F Rahman, a former private industry and investment affairs adviser to ex-Prime Minister Sheikh Hasina.
As a result, Janata Bank's financial health is now precarious, with nearly 49% of its outstanding loans going bad. Of these, 37.5% are loans to Beximco Group. At the end of June, Janata’s total exposure to Beximco Group was Tk 25,000 crore, which is about 950% of the bank's paid-up capital of Tk 2,314 crore. Banks are restricted from lending more than 25% of their paid-up capital to a single borrower.
Documents show that 72% of Beximco's loans with Janata have defaulted. Out of Janata's total disbursed loans of Tk 98,000 crore, 25.51% were allocated to 30 companies under the Beximco umbrella, and 26 of these companies breached the single borrower exposure limit.
Salman, who was a member of parliament until August 6, took substantial loans with the assistance of Janata's board and central bank officials, bypassing banking regulations. Over the past three years, Beximco’s loan amounts surged from Tk 2,045 crore in 2015 to Tk 25,000 crore by June 2024.
Between July 2021 and July 2022, Beximco established nine new companies and obtained loans through them. For instance, on August 1 last year, the Bangladesh Bank granted a no-objection certificate for Tk 479 crore in loans to Beximco, despite it violating Janata’s exposure limit. Despite objections from the Department of Off-Site Supervision, then-BB Governor Abdur Rouf Talukder approved this exemption.
A top BB official remarked that such exemptions undermine efforts to enforce good governance in the sector. BB Spokesman Md Mezbaul Haque defended the decision as necessary for loan recovery. Janata Bank Chairman SM Mahfuzur Rahman stated that the loan was provided following central bank approval.
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Salman’s political influence also facilitated frequent loan rescheduling and lenient terms, preventing Beximco from being classified as a defaulter. A significant portion of these loans, however, went bad, and a proposal for further rescheduling was rejected by the bank’s board in July.
Currently, Tk 18,000 crore of Beximco’s loans are non-performing, including Tk 5,030 crore from the Export Development Fund, which is funded by the country’s foreign currency reserves.
Md Abdul Jabbar, Janata Bank’s managing director, acknowledged that some loans were approved at the branch level without board discussion. He noted that 60% of the loans were from the Dilkusha branch in Motijheel and that measures have been taken to prevent further financial deterioration since his appointment in April last year.
Once a leading bank in Bangladesh, Janata Bank’s financial stability has deteriorated due to various loan scandals involving AnonTex, Crescent, and other large borrowers. As of June, the bank had a capital shortfall of Tk 2,189 crore.
Beximco Group declined to comment on the situation.
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