The central bank has opened in-depth analyses of the financial health of all branches of the four state-owned commercial banks, to delve into fraudulent loan sanctions, officials said on Thursday. The drastic move by the Bangladesh Bank (BB) came after its investigation team had found irregularities in loans, of up to Tk. 2,638 crore, extended to one Hallmark Group.
“The central bank has started to look into the financial health of all branches of state-owned commercial banks,” AFM Asaduzzaman, BB spokesperson, told The Independent.
“No one will be spared from drastic action, if found guilty,” he said, quoting the BB governor. “We have sought necessary information from the banks. We’ll take steps after analysing the information,” said Asaduzzaman, also general manager, governor secretariat of the BB.
Several fictitious companies, in league with some dishonest officials of Sonali, Janata, Agrani and Rupali banks, had embezzled crores of taka by opening fake letters of credit (LCs), said a BB official.
“We have already found some dazzling evidences of gross irregularities in several branches of state-owned commercial banks,” he said.
Another BB official said that the central bank had detected growing tendency to cash in LCs, without any real trade taking place. “It happens every now and then. We are taking measures to stop this malpractice,” he said.
According to a senior official of a commercial bank, the fraud happens in two ways: first, influential businessmen exercise their influence to take out money against the LCs, and, second, a section of bank officials assist the businessmen to do so.
To put a stop to this fraudulent practice, the BB had warned banks against purchases of fake trade bills, which threaten to undermine the banking system, and drain billions of taka, out of branches.
In a notice issued recently, the BB had forbidden decisions at branch level on purchases of bills—in local or foreign currency—until further notice.
The branches would have to take written permission from the head office, to do such transactions, it said.
Banks usually open LCs and purchase or discount or negotiate bills under LCs, in genuine commercial and trade transactions of their borrowers. The problem arises when trade transactions between two persons are fictitious.
In May, Sonali Bank had fired three of its senior officials, for lending Tk. 2,638 crore to Hallmark Group, in a similar case. The Ruposhi Bangla Hotel branch had lent the group around Tk. 2,000 crore, as part of a carefully devised plot.
The BB investigation team found that the Hallmark Group had opened local LCs worth around Tk. 500 crore, in favour of Anwara Spinning Mills, Max Spinning Mills, and Star Spinning Mills, apparently to buy yarn.
The three companies were also clients of the same branch. The group also gave guarantees to repay the LCs.
Following the guarantee, the bank put in the money with the accounts of the three companies, through the purchase of acceptance bill. A few days later, the companies urged the branch to transfer the money to the account of the Hallmark Group, and the branch duly obliged.
In a 17-point letter to Sonali Bank, the central bank, on May 21, said that Anwara Spinning Mills, Max Spinning Mills, and Star Spinning Mills, were owned by a key member of the Hallmark Group, Md Tanvir Mahmud, who was also the main beneficiary of the loans.
The letter noted that the Ruposhi Bangla branch had demonstrated utter negligence to banking regulations.
The branch manager had breached credibility in discharging responsibilities, by lending beyond jurisdiction, and without taking permission from the central bank, it added.
Of the total Tk. 2,638 crore, Tk. 1,735 crore was funded loans, and Tk. 902.99 crore was non-funded, the central bank said.
Altogether, Tk. 2,638.21 crore came under additional risks, at the branch.
-With The Independent input
