Under Cenbank pressure, National Bank waived Tk2,310cr for S Alam Group

TBS Infograph

Facing pressure from the Bangladesh Bank, the National Bank was forced to waive Tk2,310 crore in interest on loans to S Alam Group, a conglomerate closely tied to the ousted Hasina government and various affiliated companies.

As a result, the Chattogram-based business group, known for its irregularities in the country's banking sector, managed to escape its loan burden by paying less than half the total loan amount and interest to the private sector lender.

Eight companies of S Alam Group took 13 loans from National Bank at different times and for varying tenures. By the end of December 2021, the balance of these loans stood at Tk4,619 crore.

On 22 December 2021, the central bank wrote to the then managing director of National Bank, instructing him to waive the interest on loans taken by various companies of S Alam Group and to restructure the remaining loans. The Bangladesh Bank sent separate letters for each of the borrowing companies, and The Business Standard has seen six such letters.

The letters stated, "After the interest waiver on the loan accounts, the remaining outstanding balance of all the existing loan accounts of the customers must be adjusted at one time by 31 December 2022.

"If the interest waiver and the one-time adjustment facility are not completed within the stipulated period, after the approval of this interest waiver and residual debt adjustment facility by the board of directors of the bank, the said interest waiver and one-time adjustment facility shall be considered cancelled."

Acting upon written instructions from the Bangladesh Bank and verbal directives from its high officials, the National Bank waived Tk2,310 crore in interest on 13 loans to S Alam Group in an order dated 26 February 2022, according to officials at the lender.

When asked about this, Md Touhidul Alam Khan, managing director and chief executive officer of National Bank, told TBS, "I was not in charge at that time. As a result, I do not know how the interest was waived for the group."

An analysis of the documents reveals that in some cases, more money was waived than the amount of the loan balance. As a result, the debt of another company within the S Alam Group was adjusted by making the debt of one company negative.

For example, the debt amount of the company named Fairy Trade International from National Bank was Tk37.63 crore. However, the loan interest waived amounted to Tk41.56 crore.

In other words, S Alam Group received an additional Tk3.92 crore in waiver benefits beyond the debt status, which the group adjusted for other loans.

Similarly, the debt position of S Alam Brothers Ltd was Tk38.13 crore, but National Bank waived Tk40.32 crore, resulting in an additional Tk2.19 crore being waived off.

This correspondent attempted to contact Bangladesh Bank spokesperson Md Mezbaul Haque, but he did not answer the phone or respond to SMS for comments on this issue.

An official from the National Bank explained that these were long-term loans. The instalments previously paid by S Alam Group are considered loan interest. As the principal amount of the loan decreases over time, waiving the entire interest can result in waiving more than the outstanding debt.

A senior official at the private lender, speaking on condition of anonymity, told TBS, "Although National Bank had to waive this substantial amount of interests on S Alam Group loans under pressure from the Bangladesh Bank, the bank still has to pay taxes and interest to depositors, and shareholders have suffered financial losses due to the large interest waivers."

The official said, "Such a large bank like National Bank did not suddenly fall into a financial crisis. Influential businessmen linked to the Awami League government and the Sikder family have swindled a massive amount of money from National Bank with the assistance of the Bangladesh Bank. After not repaying these loans for a long time, they have obtained the entire interest waiver. This is why the bank has collapsed."

According to the Bangladesh Bank, the country's banks waived approximately Tk5,064 crore in interest while rescheduling loans throughout 2022.

Lenders had waived Tk1,194 crore in 2018, with the figure rising to Tk2,293 crore the following year. It dropped slightly to Tk1,578 crore in 2020 but surged again to Tk1,855 crore in 2021.