Commerce Bank, Janata run into a quagmire
Bangladesh Commerce Bank and Janata Bank Ltd are in a hard situation to recuperate Tk 633 crore they deposited with six non-bank finance institutions as the latter's fiscal health deteriorated due to massive scams and lack of good governance.
Private lender BCB and state-run Janata placed the fund with Peoples Leasing & Financial Services, Primary Finance, FAS Finance & Investment, Bangladesh Industrial Finance Business (BIFC), International Leasing and Financial Products and services (ILFS), and Premier Leasing & Finance Ltd in the past.
Although the funds have matured, the NBFIs cannot return the amount of money to the banks.
Both banks requested the central bank to intervene to help them realise the money. But they have obtained a feeble response from the regulator.
Recently, BCB has educated the central bank that as much as Tk 502 crore was stuck with the six NBFIs by November 15 last year.
The NBFIs also have stopped paying interests to the lender since fiscal 2018-19, according to a central lender paper.
The amount, that was kept in the form of term deposits, can't be renewed as the NBFIs are not paying the interest against the fund.
"This has created an obstacle to undertaking the banking procedure, including liquidity supervision and making money from the fund," the lender told the BB.
BCB has served legal notices on BIFC and ILFS within its effort to file a case. However the loan company has been forced to backtrack due to the central bank intervention.
"Against the backdrop, the lender has been around a quagmire," a senior official of the lender said.
The central bank has unearthed substantial financial scams at many of the NBFIs out of six. Some of them have failed to pay back the deposits to common savers.
Janata Bank deposited Tk 110 crore with Premier Leasing, ILFS, and FAS financing. The NBFIs possess not paid out any interests for several year, said Md Abdus Salam Azad, managing director of the state-run lender.
The interest of the deposited fund stood at Tk 21 crore, he said.
The bank wrote to the central bank in March this past year, seeking permission to sue the three NBFIs. However the BB has suggested not to document any case as it will send out a bad signal to the depositors in the NBFI sector, the BB paper explained.
"We are in a hard situation," Azad said.
Pritish Kumar Sarker, managing director of FAS Financing and Expenditure, said that the NBFI would repay the amount of money in the quickest practical time.
"We aren't getting deposits from the normal savers at this moment. We have requested the banks to renew the word deposits," he said.
Abdul Hamid Mia, managing director of Premier Leasing & Financing, said his company was now paying the interests.
"We have already repaid Tk 100 crore to BCB. The rest will be came back soon."
Premier Leasing has requested Janata Bank to renew the term deposit, he said.
Prashanta Kumar Halder and his associates embezzled a huge sum of money from four NBFIs, creating a haphazard situation found in the financial sector, according to a central lender report.
Halder, a former managing director of NRB Global Bank, misappropriated Tk 2,500 crore from ILFS, Tk 2,200 crore from FAS Finance, Tk 3,000 crore from Peoples Leasing, and Tk 2,500 crore from Reliance Finance between 2015 and 2019. He fled to Canada.
The central bank put on the Large Court in 2019 to liquidate Peoples' Leasing due to the deterioration of its financial health. The court accepted the plea and appointed a liquidator.
