Shamsul Huq Zahid| Published: August 26, 2024 21:52:10
Routes loan sharks chose to devour banks
The number of delinquent borrowers who have ripped the country's private and public banks is unknown. Together, these plunderers have brought the banking industry to its knees. The interim government that assumed power following what many fondly describe as the July Revolution or Second Independence is feeling the pinch as it embarks on streamlining the banking sector that has gone off the track. Reasons for this vital sector of the economy becoming fragile are many. At the top of the list remains the role of the cronies of the immediate past regime. Not all cronies could plunder the bank depositors' money equally. Big sharks devoured most of it with state support. After the fall of Sheikh Hasina's autocratic regime, issue after issue has been discussed publicly, and the interim government is burning the midnight oil to repair the immense damage caused to almost all sectors and vital national institutions. The task is herculean for the government, and reforming the banking sector is one of its priorities. Newspapers are rife with reports about how influential people and others close to the immediate past government resorted to irregularities to plunder banks' funds. At least two names -- Salman F Rahman, the private investment adviser to the ousted Prime Minister Sheikh Hasina and vice-chairman of Beximco Group, and Saiful Alam Masud Chowdhury, chairman of another business conglomerate, S. Alam Group -- are repeatedly pronounced in the media, for being involved in massive plundering on bank money. Authorities may still need to find out how much these groups could siphon off from the banks, but the amount could run into at least Taka one trillion. While S. Alam concentrated his modus operandi, keeping it confined mainly to banks and non-banks, Salman extended his reach beyond banks. The latter earned infamy as a master manipulator who allegedly played a crucial role in the stock market's collapse, not once but twice. Salman and S. Alam had chosen two different ways of taking out loans from banks and dealing with classified loan issues. Besides, Salman and S. Alam represent two distinct breeds. Salman and his elder brother, Sohel F Rahman, own many manufacturing and commercial units and have a strong standing in the country's business community. In contrast, until 2016, S. Alam was involved mainly in the trading and transport business. Many Chittagonians tend to believe that Alam built his fortunes while overseeing the business operations of his maternal uncle Akhteruzzaman Chowdhury Babu. S. Alam had a significant stake in the First Security Bank (later renamed First Security Islami Bank). But before the takeover of the Islami Bank Bangladesh Limited (IBBL) through dubious means, few knew about him. Salman targeted the state-owned banks as far as his loan scheming was concerned and cunningly fleeced one after another. He used his political connections to take loans and reschedule when those turned classified. Salman approached the Bangladesh Bank to introduce the loan-restructuring facility when he had exhausted all the scope of loan rescheduling. He lobbied hard with the government high-ups and paid visits to some media outlets to convince those to write in favour of the facility. He finally succeeded in his mission when the central bank issued a circular in January 2015 allowing the loan-restructuring facility for large loans. The facility was the last straw for the large loan defaulters to remain afloat. It was a one-time facility for both classified term loans and demand loans. Structured loans carried many strings, including a down payment of at least 2.0 per cent of the outstanding amount if the amount was less than Tk 10 billion and 1.0 per cent if the amount was Tk 10 billion or more. Instalments of restructured loans were to be paid quarterly. In the event of failure to pay two instalments consecutively, the restructured facility, according to the BB circular, would stand cancelled, and loans treated as Special Mention Accounts would be classified again. The banks concerned would also take measures to recover the loans and file suits under the Bankruptcy Act of 1997 in case of failure. Loans worth Tk. 150 billion in classified loans belonging to 10 top businesses were restructured in 2015 on the grounds of 'political instability'. Some relevant borrowers deposited amounts less than the required instalments, and Sonali, Janata, and Agrani had to accept those following intervention from politically powerful quarters. For understandable reasons, these banks did not take action following the borrowers' failure -- Salman's Beximco was one of those -- to deposit instalments as mentioned in the BB circular. Banks overlooked the conditions, as the banking sector regulator wanted. The fate of structured loans is still unknown. As seeking fresh loans from banks became difficult, Salman took recourse to float Islamic bonds, and to help carry forward his scheme he installed his man at the top position of the securities regulator. Salman had always been meticulous in choosing the right men and setting them in the correct positions to get schemes implemented. His entry into the close orbit around the ousted Prime Minister Sheikh Hasina soon after the 2018 national polls made things easier for him. He floated Tk.30 billion Sukuk, which was hugely under-subscribed for lack of credibility. However, banks were allegedly forced to buy the bonds under pressure from the central bank. The story of Saiful Alam is altogether different from that of Salman Rahman. In 2017, Alam, with the help of the country's most powerful intelligence agency (of course, under instruction from very powerful quarters), took over the controlling shares of the largest private bank-the Islami Bank Limited. And that was the beginning. Alam took control of at least six more Sharia-based banks and a non-bank. He reportedly managed loans worth Tk 500 billion against many non-existent business entities from different financial institutions, including banks. The most surprising part of the S. Alam episode is that Alam is no longer a citizen of Bangladesh. According to a press report, Alam, his wife and two other family members gave up their Bangladeshi citizenship on October 10, 2022, and, on the same day, got permanent residency in this country by making a payment of only US$ 75,000 each. Alam and his wife are citizens of Singapore and Greece. Alam has substantial investments in Singapore. Alam's whereabouts are unknown. He must have relinquished Bangladeshi citizenship as part of his plan to wriggle out of any problematic situation that might arise in the future. Relevant authorities have slapped a ban on the transfer of properties owned by the S. Alam Group and frozen all bank accounts held by S. Alam and his wife. Getting back the bank funds devoured by loan sharks, naturally, will be one of the top priorities of the interim government. It remains to be seen what actions the government chooses to reach that goal.