Janata sinks into despair for one large borrower
A single borrower can create sufficient trouble for a bank by way of eating up profits and dragging down the capital base from positive to negative, if the current state of Janata Bank is any indication.
The state-owned bank is struggling to maintain its requisite capital after one of its clients, AnonTex Group, became a defaulter, leaving Janata with a significant provisioning obligation.
In 2015, the business group restructured loans of Tk 1,095 crore under the central bank's special package for borrowers with loans of Tk 500 crore and above after furnishing down payment of just 1-2 percent instead of the usual 10-15 percent.
But, it failed to continue with the instalment payments.
Subsequently, the state bank plunged into a capital shortfall of Tk 1,272.93 crore in September last year from a surplus of Tk 278 crore in December 2016, according to a report of the Bangladesh Bank.
The bank's capital to risk-weighted asset ratio deteriorated to 7 percent in September last year from 10.69 percent in December 2016 against the required ratio of 11.25 percent.
AnonTex Group, an apparel exporter with annual turnover of $150 million, owes Tk 2,153 crore to Janata, according to the bank's statement.
In September last year, it sought further rescheduling of its three companies' loans, which the Janata board agreed to but the central bank declined.
AnonTex also requested the central bank to allow it to make balloon payment, which is a loan instalment paid usually at the end of the loan period. The word balloon refers to the fact that the final payment is large and has ballooned in comparison to the other payments.
The apparel exporter also demanded bringing down the interest rate against its loans to 10 percent from existing 11 percent. But the central bank rejected both the proposals.
The huge capital shortfall prompted the BB to conduct a detailed investigation into the loan, according to a central bank official.
“We found a tendency of aggressive lending by the bank when it came to large borrowers,” he said.
In September last year, the bank's loan-deposit ratio was 60.45 percent, the highest among the state banks.
Sonali's loan-deposit ratio was 34.04 percent, Agrani's 51.26 percent and Rupali's 58.93 percent. The classified loan of the bank sees significant increase to 20.94 percent in September last year from 16.14 percent in December 2016.
Janata's total classified loan stood at Tk 8,187 crore in September last year, up 37 percent from December 2016.
Irregular payment of some other restructured large borrowers accounts for the rising default loans and the capital shortfall, said Janata's Managing Director Abdus Salam Azad.
Azad said the bank will once again forward the restructuring proposal of AnonTex's three companies -- Galaxy Sweaters & Yarn Dyeing, Suprov Spinning and Simran Composite -- to the central bank. “We would like to give them some breathing space to come out of the defaulter status.”
In the new rescheduling proposal, the size of instalment will be increased but the payment tenure will remain unchanged at 10 years.
The rescheduling will be implemented only after getting the no-objection from the BB, he said.
Ratanpur Group, another one of Janata's large borrowers that defaulted, will be given the rescheduling facility in the same manner, according to Azad. The group had restructured loans amounting to Tk 811 crore with three banks, Tk 435 crore of which was with Janata, according to data from the central bank.
