Bangladesh Bank (BB) has imposed limits on the disbursement of loans for six banks owned by the controversial S Alam Group for restructuring these banks.
From now on these banks cannot disburse loans of more than Tk5.0 crore without the permission of the central bank. Institutions that have overdue and overdue loans cannot be renewed without cash collection.
Executive Director and Spokesperson of BB Md Mezbaul Haque confirmed this information to UNB. He said, that from today, these six banks’ loan disbursement and LC opening will be stopped for an indefinite period.
On Monday the BB sent letters to six banks informing them of this decision. The six banks are Islami Bank, Social Islami Bank, First Security Islami Bank, Union Bank, Global Islami Bank, and Bangladesh Commerce Bank. Earlier, the same limit was fixed for the private sector National Bank.
The central bank imposed this limit at a time when these 6 banks were almost liquidity empty due to S Alam Group’s abuse of its loan ability. Former BB Governor Abdur Rouf Talukder went into hiding after the fall of the Awami League government on August 5.
At that time, the central bank gave liquidity support by printing currency around Tk35,000 crore to these 6 banks. The S Alam group also looted this money disguised as a loan.
The interim government appointed economist Ahsan H Mansur as governor last Wednesday (August 14). After that, the new governor decided to save the 6 banks.
In the letter, BB said that this measure has been taken to prevent deterioration of the overall financial condition of the banks and to protect the interests of the depositors.
The central bank directives also stated that no credit facilities other than agricultural investment, working capital, and loan to CMSME sector, loans given under incentive package, loan facility against fixed deposits kept in own bank and loans against 100 percent cash margin and other indirect loan facilities can be given.
If these loans and loan facilities are more than Tk 5.0 crore, the prior approval of BB should be taken. Expired/Limited outstanding loan status no customer's existing loan facility can be renewed/extended without cash collection.
Existing investments of other banks or financial institutions cannot be acquired. Apart from this, every bank has to submit the debt collection data of the top 20 borrowers monthly, according to the BB instructions.
An official of the Banking Regulations and Policy Department of BB said that these banks are being planned to be restructured. This decision has been taken as its initial step. Through this, anonymous loan distribution has been prevented.