NPLs in S Alam-controlled banks under Hasina jumps by Tk86,000cr in Jul-Dec

Infograph: TBS

Summary:

• Bangladesh Bank dissolved 14 boards after Hasina government's fall in August.
• Islami Bank's NPLs hit Tk32,816 crore, 21% of total disbursed loans.
• S Alam Group borrowed Tk1.05 lakh crore from Islami Bank alone.
• Beximco's defaulted loans reached Tk23,120 crore across eight banks.
• Six state-owned banks saw NPLs rise by Tk34,135 crore in late 2024.

Non-performing loans (NPLs) in eight banks, including Islami Bank, controlled by S Alam Group during the Awami League regime, have risen by Tk86,347 crore in six months through December, according to the Bangladesh Bank.

Previously, the boards of private sector lenders attempted to reduce defaulted loans by concealing information, said central bank officials.

After the fall of the Hasina government on 5 August, the Bangladesh Bank dissolved the boards of 14 banks, including those controlled by S Alam, Salman F Rahman, and former land minister Saifuzzaman, removing the lenders from their control.

In the second half of 2024, the total defaulted loans of 12 of these banks increased by Tk1.03 lakh crore, according to the central bank's latest report.

IFIC Bank, which was controlled by Hasina's private industry and investment adviser Salman, saw an increase of Tk13,426 crore; UCB Bank, controlled by Saifuzzaman, increased by Tk3,535 crore; and Exim Bank, controlled by Nazrul Islam Mazumder, rose by Tk129 crore, according to Bangladesh Bank's latest report.

A few months after the fall of the Awami League government, the Bangladesh Bank dissolved the boards of 11 banks. Last week, the boards of three more private banks – NRBC, NRB, and Meghna Bank – were dissolved and reconstituted

However, the two remaining banks fared well during the July-December period, with defaulted loans decreasing by Tk19 crore in Meghna Bank and Tk339 crore in NRBC Bank.

Bankers said during the Awami League rule, defaulted loans were hidden due to the influence of the bank chairmen. After the interim government took office, these hidden loans began to surface, as highlighted in a Bangladesh Bank report.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, told TBS, "NPLs have increased for several reasons, one of which is that banks had classified many defaulted loans as regular, and now those loans are defaulting again."

He also said defaulted loans have increased because the central bank implemented its loan classification process based on international standards. The money market regulator will fully adopt these standards from next April, which may lead to a further rise in defaulted loans.

The managing director of a Sharia-compliant bank said the true extent of defaulted loans should be revealed to provide a clear picture and allow for appropriate reform measures.

According to central bank data, the defaulted loans of the 14 banks whose boards were restructured stood at Tk49,697 crore at the end of June 2024. In just six months, this amount increased to Tk1,52,890 crore.

Several senior central bank officials said after Hasina's fall, irregularities in these banks began to surface, leading to deposit withdrawals.

Many banks struggled to meet depositors demands, causing instability in the sector. However, following Bangladesh Bank's initiative to dissolve and restructure the banks' boards, some stability has been restored.

The central bank's report said Islami Bank, among the banks whose boards were dissolved, has the highest defaulted loans, totalling Tk32,816 crore as of last December. This accounts for 21% of the bank's total disbursed loans, and it is currently facing a provision deficit of Tk13,153 crore.

Just six months ago, Islami Bank's defaulted loans were Tk7,724 crore. In that time, defaults increased by Tk25,092 crore. Until mid-August, the board of the country's largest Sharia-compliant bank was dominated by S Alam Group, which caused the bank to suffer losses.

A confidential report from the Bangladesh Financial Intelligence Unit reveals that S Alam Group has borrowed a total of Tk2.25 lakh crore, both directly and indirectly, from ten banks and one financial institution in the country.

Of this, S Alam borrowed Tk1.05 lakh crore from Islami Bank alone, while the second-highest loan of Tk45,636 crore was taken from Fast Security Islami Bank.

Among the dissolved banks, IFIC Bank saw its defaulted loans increase by Tk13,426 crore in just six months. In June 2024, its defaulted loans were Tk3,756 crore, rising to Tk17,182 crore by the end of December.

The Bangladesh Bank has so far identified that Beximco has a total of Tk50,000 crore in loans with 16 banks and seven non-bank financial institutions, of which Tk23,120 crore has turned into defaulted loans with eight banks, according to a Bangladesh Bank statement sent to the High Court as of September 2024.

State-owned Janata and Sonali Banks are the most affected by Beximco's defaulted loans. Of Beximco's total defaulted loans, Janata accounted for Tk19,507 crore and Sonali for Tk1,544 crore as of September last year.

According to a report published in TBS, Salman obtained loans from IFIC Bank for 14 companies that benefited from the private lender's generosity, with a total of Tk7,129 crore granted across its principal, Gulshan, and other branches between 2020 and 2023, as per the central bank's inspection reports.

During the Hasina government, the first-generation National Bank was controlled by the Sikder Group. However, after the death of Sikder Group Chairman Zainul Haque Sikder, the bank eventually went under the control of S Alam.

The lender has the second-highest NPLs among private banks, totalling Tk25,846 crore as of last December. This accounts for 60% of the bank's total disbursed loans, and it is currently facing a provision deficit of Tk18,720 crore.

Six months ago, in June 2024, the bank's NPLs stood at Tk20,929 crore. Despite its rich history as the country's first private bank, it has become a loss-making institution due to widespread loan irregularities, poor governance, and conflicts among directors.

NPLs in UCB increased by Tk3,535 crore, rising to Tk6,848 crore in December from June 2024.

The Criminal Investigation Department (CID) of the police has launched an investigation into money laundering allegations against Saifuzzaman. A press release from the CID in October said between 2016 and 2021, he bought 620 houses in the US, UK, and UAE for around Tk5,724 crore.

A few months after the fall of the Awami League government, the Bangladesh Bank dissolved the boards of 11 banks. Last week, the boards of three more private banks – NRBC, NRB, and Meghna Bank – were dissolved and reconstituted.

NPLs of six state-owned banks increased by Tk34,135 crore in the last six months of 2024.  At the end of June 2024, NPLs in these banks totalled Tk1.02 lakh crore, rising to Tk1.36 lakh crore by December.

During this period, Janata Bank's NPLs increased by Tk19,147 crore, Agrani Bank's by Tk6,607 crore, Rupali Bank's by Tk4,616 crore, and Sonali Bank's by Tk3,410 crore.