Ailing Janata mulls lending to Beximco flouting law

Violating a law and a memorandum of understanding (MoU), the crisis-ridden state-owned Janata Bank is considering lending to Beximco Group to help it pay the salaries of workers employed in the units under the Beximco Industrial Park, sources say.
On November 28, the first meeting of the advisory council committee tasked with reviewing the labour and business situation of the factories under the industrial park was held with Labour Adviser Brig Gen (retd) M Sakhawat Hussain in the chair. The meeting decided the Janata Bank loan would be used to pay the next three months' salaries.
In a letter on December 10, the Financial Institutions Division (FID) requested the Finance Division under the finance ministry to take steps in this regard.
"There is currently a severe liquidity crisis at Janata Bank. Besides, fresh financing in favour of Beximco Group will violate sections 27 (aa) and 26 (b) of the Bank Company Act 1991 as well as the terms of the MoU signed with the Bangladesh Bank," the letter read.
The FID said a letter should be sent to the central bank seeking its approval for the loan and it should seek exemptions from the relevant Bank Company Act sections as well as the MoU conditions.
Once the central bank approval comes, the loan can be disbursed, subject to receiving a cheque of the equivalent amount from the borrower and clearance from the FID, the FID further said.
Beximco Group has so far borrowed Tk 234.07 billion from Janata Bank, a source at the bank said, adding the entire amount has become classified.
When asked, an official concerned said, "We are working on the issue. We will ask the bank soon to take steps in this connection as many people's livelihoods are involved with the business group."
According to the available data, the bank has a capital shortfall of around Tk 340 billion and also non-performing loans of Tk 605 billion, which is rising gradually. The figure is 61.39 per cent of the total disbursed loans.
Until September this year, the bank had a provision shortfall of more than Tk 390 billion.
Janata Bank's fund management has been adversely affected by excessive disbursement of loans in the past few years.
Due to lending a large amount of money to a few customers and the non-recovery of the loans, the bank slipped into a liquidity crisis.
It recently sought some Tk 200 billion in an urgent bailout - Tk 100 billion for recapitalisation and Tk 100 billion in the form of loan support - as its capital base plummeted into negative territory.
Bankers and sources in the banking circles said much of the loans were taken out by some big business groups, including Beximco, S Alam, and AnonTex, during the previous Awami League regime.

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