Islami Bank has approved a 700 crore loan to AnonTex Group, one of Janata Bank’s five largest borrowers that has made negligible repayments in 13 years but has enjoyed undue facilities.
AnonTex concern Shob Meher Spinning Mills was approved for a loan at Islami Bank’s 1997th executive committee meeting on August 24.
The loan from Islami follows a major favor AnonTex received from Janata Bank the previous month a possibly unwitting move by the state lender.
The Janata Bank granted AnonTex a Tk 3,359.19 crore interest waiver last November on the condition it repay the principal by June 15. Loans will be classified otherwise.
AnonTex’s liabilities to Janata stood at Tk 7,726 crore at the end of 2022, which is about 334 percent of the bank’s paid-up capital.
AnonTex, whose website boasts Tesco, New Look, and Zara as clients and $150 million in revenue, failed to repay the loan.
Loans were not classified; rather, AnonTex was given until the end of the year to clear its liabilities to Janata.
A defaulted entity cannot get new credit under the Bank Company (Amendment) Act 2023.
Md. Younus (Badal), managing director and chairman of AnonTex Group, says Shob Meher Spinning Mills still owes Janata Tk 105 crore.
Under the Bank Company Act 1991, a default by any concern or director of a group would make the entire group ineligible for fresh loans. The much-criticized Bank Company (Amendment) Act 2023 modified this so that only the defaulting concern or individual would be barred from getting fresh loans.
Mohammed Monirul Moula, Islami’s managing director and chief executive officer, replied that “the loan sanctioning is still in progress, so I cannot share further details at the moment. The company is eligible for the loan.”
Islami Bank’s Foreign Exchange Corporate Branch at Dilkusha has already disbursed Tk 140 crore to Shob Meher Spinning Mills.
AnonTex MD Younus told The Daily Star yesterday that he is not sure if Islami approved the loan.
He said the loan would serve as working capital for Shob Meher Spinning Mills, which was established in 2016 after Janata suspended working capital loans for AnonTex.
Younus said Islami Bank has been Shob Meher Spinning Mills’ bank for years because Janata gave us an NOC (no-objection certificate) for doing business with another bank.
Islamic Bank, mired in a liquidity crisis, has issued a fresh loan to an errant borrower in the banking sector.
Managing directors and CEOs of Bangladesh’s biggest banks have complained about the bank’s lack of due diligence.
It is safe to say that the corporate governance of a bank is poor when it does not maintain due diligence while approving loans.
Islami Bank: Struggles, Regulatory Oversight, and Urgent Liquidity Concerns Persist
Amin, who previously ran Meghna Bank and NCC Bank, says lenders cannot lend to defaulted business groups.
In addition, Islami Bank has had a central bank-appointed observer since December last year following allegations of violations of banking rules.
Islami’s current observer, Md. Sarwar Hossain, declined to comment on the loan approval.
The country’s largest private lender, which has been experiencing an acute liquidity crisis, failed to maintain the minimum levels of cash and liquidity for most of 2012.
A fine of Tk 162 crore was subsequently imposed by the Bangladesh Bank. Banks are strapped. The sum must be furnished by September.
Furthermore, it has received liquidity support from the BB. BB took Tk 8,000 crore from the central bank on December 29, the last working day of 2022, to meet its immediate liquidity needs.