Bangladesh Bank allows active Beximco companies to open LCs under conditions

Bangladesh Bank has given directions to allow active and revenue-generating entities within the Beximco Group to open Letters of Credit (LCs), under strict conditions, despite the group being embroiled in loan default scandals and corruption probes.

The instruction was approved by Bangladesh Bank Governor Ahsan H Mansur during a high-level meeting with top executives from 20 banks and seven non-bank financial institutions held on Saturday (24 May). Lutfey Siddiqi, the chief adviser's envoy for international affairs, was also reportedly present.

A senior official of the central bank said letters outlining the directive may be sent to banks in the coming days.

According to banking regulations, if a company within a group defaults on a loan, it and its subsidiaries are generally barred from receiving further credit.

Since LCs are backed by guarantees treated as loans, banks have been unwilling to open LCs for Beximco companies, many of which have defaulted. The central bank issued its directive to address this situation.

Syed Mizanur Rahman, managing director and CEO of AB Bank, told TBS, "The central bank's proposal regarding Beximco is definitely positive. We will try our best to follow the instructions. However, we are still reviewing which Beximco companies will be eligible for banking facilities."

"Beximco Pharma has taken loan from our bank. We have been instructed to properly issue import LCs of the company," said Md Mazibur Rahman, managing director of Janata Bank.

"At the same time, we have also been asked to take necessary measures to recover Beximco Group's defaulted loans. We will take action accordingly," he added.

Bank officials present at the meeting said while some of Beximco Group's companies are in financial distress, others—such as Beximco Pharmaceuticals, Shinepukur Ceramics, and its solar ventures—remain profitable.

The governor specifically instructed banks to facilitate LC openings for these viable businesses and consider working capital support.

Another senior Bangladesh Bank official, requesting anonymity, told The Business Standard that the governor stressed the importance of keeping Beximco's active establishments running, as they employ a large number of people. Banks have also been asked to help sustain the group's export operations to aid financial recovery.

"We have been instructed to address Beximco Group's struggling companies and to help the good companies continue their business," said Sheikh Mohammad Maroof, managing director of Dhaka Bank.

"If the companies can operate properly, it will be possible to recover the defaulted loans from them, which will ultimately benefit the banking sector," he added.

A managing director of a private bank said they were also told to ensure that export proceeds are deposited into the accounts of the banks issuing the LCs and that funds from one sector are not diverted to another.

The central bank is also reviewing the process of returning customer funds invested in Beximco's Sukuk bond.

Beximco Group has been facing operational challenges following the arrest of its Vice-Chairman Salman F Rahman, who also served as investment adviser to the now-deposed prime minister Sheikh Hasina.

While some factories have been declared laid off, profitable entities like Beximco Pharmaceuticals and Shinepukur Ceramics remain operational.

According to a Bangladesh Bank report submitted to the High Court last December, Beximco Group's 78 companies owe around Tk50,098 crore to 16 banks and seven financial institutions. Of this, Tk31,000 crore was classified as defaulted as of 30 November last year.

In January, Labour and Employment Adviser Brig Gen (retd) M Sakhawat Hussain disclosed that Beximco took Tk12,000 crore in loans in the name of 16 companies located at Beximco Industrial Park, though these factories exist only on paper.