Twenty-six export-oriented garment manufacturers on Saturday demanded remedy and investigation into alleged fake loans worth hundreds of billions of taka created in their names by the Narayanganj branch of Premier Bank PLC.
These irregularities occurred between 2017 and 2023 while HBM Iqbal was the chairman at the bank during the Awami League-led government.
At a press conference at the Economic Reporters' Forum, the factory owners alleged that the bank branch created massive liabilities through 'fake' back-to-back letters of credit without their knowledge and later converted those liabilities into loans in the names of the customers. In the written statement, Arifur Rahman, owner of Dowas Land Apparels, said that many factories are now on the verge of closure due to the alleged fraud.
"Bank officials, in collusion with the head office and the then chairman, carried out these irregularities without our consent," he said. "Bangladesh Bank will not be able to prove the business owners' involvement."
He said the affected companies had repeatedly sought intervention from the central bank, submitting 22 letters over the matter, but received no remedy.
According to the statement, the alleged irregularities began in 2017, when some officials at the Narayanganj branch reportedly used fake IDs to create forged sales contracts.
Despite the lack of actual raw material imports, those documents led to the opening of multiple back-to-back LCs.
The exporters said that loans had been created in the names of 43 companies at the branch, including 26 export-oriented garment factories where around 28,000 to 30,000 workers had once been employed.
They said many of those factories are now either closed or struggling to survive because of the fraudulent liabilities.
Total Fashion, one of the victim factories, had originally availed itself of Tk 480 million against an approved loan limit of Tk 500 million from the bank branch. However, in 2023, the company suddenly found that its loan liability had ballooned to Tk 3.60 billion allegedly through fake back-to-back LCs.
The owner of the company tried repeatedly to determine how the loans had been created but failed to obtain clear information despite lodging complaints with the bank's head office, Bangladesh Bank and even the High Court.
Explaining the alleged fraud mechanism, the exporters said that a company exporting goods worth Tk 10 million would normally be eligible for back-to-back LC facilities worth around Tk 7.5 million.
Instead, they alleged, LCs worth as much as Tk 75 million were opened in some cases.
Although export proceeds are normally used to settle back-to-back LC liabilities, the exporters alleged that liabilities were instead adjusted through dollar purchases from an entity called Premier Exchange, which later appeared as loans in the names of customers.
The factory owners questioned how such large-scale irregularities escaped repeated audits conducted by both the bank's head office and Bangladesh Bank.
The owners alleged that even after High Court directives, the bank had yet to disclose detailed information on how much loan had been shown against each customer.
They demanded an immediate investigation into the alleged fraud, cancellation of fake liabilities and measures to restart the affected factories.
On the other hand, a total of six local audit firms, along with Ernst & Young (EY), have been deployed to conduct a forensic audit into all types of alleged irregularities at Premier Bank.
As part of the move, the reconstituted board of the private commercial bank has already assigned an external audit firm to carry out a special audit of its Narayanganj branch to detect alleged irregularities.
"The audit firm is expected to submit its preliminary report by the end of this week," a senior official of the bank told The Financial Express (FE) in response to a query.
The official also said the bank already formed a high-level internal committee to look into the issue closely.
Meanwhile, the central bank has also sought detailed reports on the 26 accounts of the export-oriented garment factory owners from the bank.
newsmanjasi@gmail.com
