BB moves to allow 100% margin LCs to keep Abdul Monem Sugar afloat

The Bangladesh Bank has sought government approval to allow Abdul Monem Sugar Refinery Limited to open letters of credit (LCs) at a 100% margin until 30 June 2027, despite the company being classified as a loan defaulter due to its role as a guarantor for a defaulted loan of around Tk455 crore.

Infographics: TBS

The facility is aimed at keeping the refinery operational as it imports raw materials, according to central bank officials.

Abdul Monem Sugar is the corporate guarantor for a defaulted loan of Abdul Monem Limited, the flagship company of Abdul Monem Group, at state-owned Agrani Bank.

Notably, under the Bank Company Act, 1991, guarantors of defaulted loans are also classified as defaulters and are therefore ineligible for new loan facilities or the opening of LCs.

However, the Bangladesh Bank may, in consultation with the government, exempt any individual or institution from provisions of the law. 

Exercising that authority, the central bank on 16 June sent a letter to the Financial Institutions Division of the finance ministry, seeking approval for the facility.

Bangladesh Bank spokesperson and Executive Director Arif Hossain Khan told TBS that the central bank had sought the ministry's opinion in accordance with the law.

"If the finance ministry thinks they can be provided with this facility and grants approval, only then can we exempt them from the restrictions. If the ministry does not approve, then we will not give them this facility," he said.

According to Bangladesh Bank data from March 2025, Abdul Monem Limited has defaulted loans amounting to Tk698 crore across 24 banks and non-bank financial institutions, including Agrani Bank, IFIC Bank, United Commercial Bank, and Dutch-Bangla Bank. Of this amount, around Tk455 crore is owed to Agrani Bank.

In August last year, Abdul Monem Group applied for the restructuring of these loans under special conditions.

The request for the LC facility was submitted to Governor Mostaqur Rahman on 7 June.

The refinery argued that several international agreements for importing raw sugar remain active and that failure to open the required LCs could result in compensation payments of around $23,000 per day.

The company also said that only a limited number of sugar refineries are currently operating at full capacity and that disruptions to its imports could affect domestic sugar supply.

The refinery is currently being operated by Abul Khair Limited following an agreement to acquire the business.

Sugar produced at the refinery is being marketed under the brand name "Starship Sugar", although the ownership transfer has not yet been completed officially.

ASM Mainuddin Monem, managing director of Abdul Monem Group, told TBS that Abul Khair Group, as the buyer, would repay the company's bank and bond liabilities.

"This situation has been created due to not receiving any cooperation from Agrani Bank. Because Agrani Bank was not informed beforehand about the sale of the refinery, they are not cooperating with us in any way," he added.

According to Mainuddin, Agrani Bank has become concerned about the implications of the ownership change for its loan recovery efforts.

As a result, the company sought Bangladesh Bank's intervention to allow LC openings at a 100% margin so that refinery operations could continue.

Asked about the group's overall business condition, he said banks had not extended fresh financing for a long period.

"No bank has given a loan in the last 18 months. Construction work has also decreased. The business situation is not good," he said.

Founded in 1956 by the late industrialist Abdul Monem, the group expanded into construction, food processing, beverages, pharmaceuticals, energy and other sectors over several decades. The sugar refinery was established in 2007.

However, following Abdul Monem's death in 2020, several group companies faced financial difficulties amid rising borrowing costs, currency depreciation and a slowdown in major government infrastructure projects.