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Big-deal Tk 15.52b loan for Orion solar project blocked

FE REPORT | September 02, 2024 00:00:00


Everything was set to approve a loan worth Tk 15.52 billion for Orion solar-power project bypassing certain conditions, including the single-borrower exposure limit. But following the change of government through student-people uprising the Financial Institution Division of the Ministry of Finance refused to give the approval at the last moment, thereby saved the country's banking from witnessing yet another loan scam.

The lending institution, the state-owned Rupali Bank, and the sector regulator, the Bangladesh Bank, together tried to bend the relevant rules and sought to apply a special provision of the Bank Company Act to make available a substantial volume of loan to the Orion Renewables.

Having authorised by its immediate-past Governor, Abdur Rouf Talukder, the central bank sent the loan proposal for taking necessary consent from the Financial Institutions Division (FID) on June 24 last. The FID made known its refusal to issue no-objection to waiving of the 26 B(1) provision of the Bank Company Act, 1919 on August 14.

"The loan was at the final stage of positive endorsement under the last government, but, later, the FID made a u-turn from its earlier decision after the interim government took office," says an official.

He mentioned that the former BB governor office had made an intervention to give positive note regarding the loan approved by the bank for the Orin solar power plant.

The state-run Rupali bank had approved the term loan amounting to Tk 15.41 billion at its 1222th board meeting held on May 13, 2024, in favour of Orion Renewables Munshiganj under Orion Group to set up a 200MW power plant using solar energy.

The aggregate approved funded loan to the Orion Renewables Munshiganj Ltd, including the existing loan facilities of its other subsidiaries, was to be 62.49 per cent of the regulatory capital (Tk 24.59 billion) of the bank, which exceeded the single- borrower-exposure limit, according to the Rupali bank statement. The single-borrower exposure limit is 25 per cent of the paid-up capital of a bank.

On the other hand, as per the BB circular dated January 16, 2022, total loan status (funded and non-funded) of the Orion Renewables was about Tk 18.42 billion inclusive of non-funded loan worth Tk 2.92 billion. The amount would stand at 74.43 per cent of Regulatory Capital of the bank, the BB letter sent to the FID mentioned.

According to the provisions described in the sub-section (1) of the Section 26B and the section 13 (1) under the Bank Company Act, "The aggregate principal amount of funded and non-funded exposure to a single person/counterparty or a group shall not exceed 25 per cent of the capital at any point of time."

On the other hand, "The aggregate principal amount of funded exposure to a single person/counterparty or a group shall not exceed 15 per cent of the capital at any point of time."

Besides, as per the existing Memorandum of Understanding (MoU) and regulatory capital (Tk 24.59 billion of the bank) as of December 2014, Rupali Bank was required to take prior approval from the BB due to surpassing by more than 10 per cent the bank's regularity capital.

However, as stated in the Section 121 of the Bank Company Act, 1991, "Bangladesh Bank, in consultation with the government, by issuing notification, may declare that all or any particular provisions of the Act, in respect of any particular banking company or all banking companies in general, shall or shall not apply during any period mentioned in the notification."

The BB in its letter to the FID suggested that the application of the section 26B (1) of the Bank Company Act, 1991 can be scrapped for successive five years by consent of the government, and the central bank can fix the upper limit for the next 05 years instead of existing 25-percent ceiling.

When contacted, a senior official of the bank said, "Big loans were approved by the Rupali Bank board without following any rules for invisible reasons. The Orion's loan was also sanctioned in the same way during the immediate-past government.

The project cost has been esteemed around Tk 27.60 billion. The debt-equity ratio was 56:44 including IDCP fund.

It was supposed to sell electricity under no-electricity, no-payment basis under a 20- year power-purchase agreement between Bangladesh Power Development Board (BPDP) and Renewables Munshiganj.

Banking sector insiders said the Section 121 of the Bank Company Act had been abused in many cases to distribute favour to many delinquent borrowers and loan scammers having strong political co9nnetions with the immediate past government. Unfortunately, they said, the central bank honchos also became party to such loan approval process.

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