Islami Bank, facing a liquidity crisis, has granted a loan of Rs 700 crore to a subsidiary of Anontex Group, a conglomerate that ranks among the top five borrowers from Janata Bank. Anontex Group has been the beneficiary of favorable treatment from Janata Bank, despite defaulting on loans for over 13 years.
In August 1997, the Executive Committee of Islami Bank approved the loan for Shab Meher Spinning Mills, a part of the Anontex Group. This loan comes after Anontex received substantial assistance from Janata Bank the previous month. Janata Bank had previously granted an interest waiver of Tk 3,359.19 lakh to Anontex in November of the previous year, with the condition that the principal loan would be repaid by June 15 of the current year, or it would be classified as a default.
As of the end of 2022, Anontex’s debt to Janata Bank stood at Tk 7,726 crore, equivalent to 334 percent of the bank’s paid-up capital, exceeding the single borrower maximum limit for state-owned commercial banks.
Anontex Group, an export-oriented garment manufacturer established in 2004, lists renowned brands such as Tesco, New Look, and Zara as clients on its website and reports an annual turnover of $150 million. Despite this, the company has struggled to repay its loans.
Anontex’s loan was not categorized as a default; instead, they were given until the end of the year to repay Janata Bank. However, the Bank Companies (Amendment) Act-2023 prohibits companies from obtaining fresh loans in the event of a default.
Anontex Group’s Managing Director and Chairman, Yunus (Badal), stated that Shab Meher Spinning Mills owes Tk 105 crore to Janata Bank, which is part of the arrears up to December 31.
In contrast to the Bank Companies Act-1991, which made an entire group ineligible for fresh loan facilities in case of default by any individual or director within the group, the Bank Companies (Amendment) Act-2023 only restricts defaulters from obtaining fresh loans.
When questioned about why Islami Bank, itself facing numerous crises, extended a loan to Anontex Group, the bank’s Managing Director and CEO, Muhammad Monirul Mawla, responded, ‘The loan approval is still in the process, so I cannot provide details at this time. However, the company is fully deserving of the loan.’
However, Islami Bank’s records indicate that its foreign exchange corporate branch in Dilkusha had already disbursed a loan of Tk 140 crore to Shab Meher Spinning Mills as of September 7.
In response, Anontex’s Managing Director (MD), Yunus, stated, ‘I am not certain whether Islami Bank has approved the Tk 700 crore loan.’ He added, ‘This loan will serve as working capital for Shab Meher Spinning Mills, established in 2016. We applied for the loan after Janata Bank suspended the working capital loan for Anontex.’
Anontex Group’s Controversial Loan Raises Governance Concerns in Islamic Banking
The decision to provide fresh lending facilities to this controversial borrower has raised questions about the governance of liquidity-challenged Islamic banks. Mohammad Nurul Amin, former Chairman of the Association of Bankers Bangladesh, commented, ‘This reflects a lack of proper precautions by the bank. When a bank fails to take adequate precautions in loan approvals, it indicates weak governance within the bank.’ He further emphasized, ‘No bank should extend loans to a defaulting business group.’
This concerning development occurred while the Central Bank had appointed observers to monitor Islami Bank since December of the previous year, following allegations of violating banking regulations in loan disbursements. Sarwar Hossain, the current observer from the central bank, declined to comment on the loan approval for Anontex.
Meanwhile, Islami Bank’s liquidity crisis has been so severe that it struggled to maintain cash and liquidity minimums for most of the first half of the year, resulting in a Tk 162 crore fine from the Bangladesh Bank. The bank was granted an extension until September to pay the fine.
Furthermore, Islami Bank has been relying on liquidity support from the Bangladesh Bank for several months, with a significant amount of Tk 8,000 crore borrowed on December 29, the last working day of 2022, under a special arrangement to address its immediate liquidity needs.
