BB bars Janata’s 5 branches from disbursing loans

The Bangladesh Bank has put a restriction on loan disbursement by state-run Janata Bank’s top five branches as 72 percent of the bank’s loan is concentrated in those branches.

The branches are the Local Office branch, Janata Bhaban Corporate branch, Sadharan Bima Bhaban Corporate branch in Chattogram, Dilkusha Corporate branch, and Motijheel Corporate branch.

The central bank on November 4 sent a letter to Md Abdus Salam Azad, the chief executive officer and managing director of Janata, saying the bank’s adjusted loan growth had been increased to 15 percent from 12 percent based on some conditions in response to an application.

As part of the conditions, the Bangladesh Bank instructed the bank not to lend from the top five branches.

Till June 30 this year, Janata’s total loans and advances stood at Tk 63,435 crore.

Of this, the top five branches accounted for Tk 45,662 crore (72 percent), as per the central bank data.

A high official of the central bank said credit concentration in top branches was an indicator that a bank’s credit risk was increasing.

The central bank also asked Janata to reduce the large loan concentration as the latter lent Tk 37,733 crore to only 25 borrowers.

Four of the 25 borrowers have become defaulters, with their bad loans amounting to Tk 7,144 crore, as per the central bank data.

Meanwhile, the Bangladesh Bank also asked Janata to take steps to increase net interest income by mobilising interest-free and low interest-bearing deposits.

The bank was instructed to reduce high interest-bearing institutional term deposits and stop the renewal of high interest-bearing deposits.

It incurred interest losses of Tk 30 crore till June this year due to its high interest-bearing deposit mobilisation, its data shows.

The bank’s deposit crossed Tk 1 lakh crore for the first time on September 23 this year, reaching Tk 1,00,348 crore.

Its deposit increased by Tk 17,948 crore in nine months from Tk 82,400 crore on December 31 last year due to aggressive deposit mobilisation.

Janata’s financial health

Janata now has the highest amount of default loans in the banking sector.

Its non-performing loan stood at Tk 13,837.17 crore till September this year, which was 22.23 per cent of its total outstanding loan.

The amount was Tk 5,818 crore at the end of 2017.

The sharp increase in bad loans has largely been attributed to the failure of two clients – Crescent Group and AnonTex – to repay loans.

The bank lent over Tk 10,000 crore to the two clients by violating the central bank’s single borrower exposure limit criteria, according to an inspection report of the banking regulator.

Janata faced a Tk 345 crore capital shortfall till June this year.

It took Tk 8,419.78 crore in deferral facility from the central bank.

If it did not take the facility, its capital shortfall would have been Tk 8,764.81 crore.