Bangladesh Bank has suspended Phoenix Finance Managing Director SM Intekhab Alam, following evidence of irregularities with loan defaulters and depositors, going against the company's interests.
The central bank on Thursday sent a letter in this regard to the non-bank financial institution's board of directors, directing to assign him to the human resources department and designate a new chief executive for the company.
For 16 consecutive years from 2008, Intekhab Alam served as the managing director, overseeing the company through the last two years marked by financial losses caused by various irregularities.
On November 27, The Business Post published a report entitled “Mismanagement, irregularities cripple Phoenix Finance” revealing that nearly 57 per cent of loans disbursed by Phoenix Finance so far are now defaulted, with the figure exceeding Tk 1,500 crore.
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The firm is witnessing an alarming rise in provision and capital shortfalls. A rapid decline in asset quality is increasing accumulated losses, while a crisis of confidence is making it difficult for the firm to get fresh deposits.
Under the circumstances, Phoenix Finance is facing a serious liquidity crunch. This is preventing the firm from maintaining the central bank requirement of the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). The firm has also been unable to pay customers’ FDRs on time.
Every day, at least one customer is submitting complaints to the central bank against Phoenix Finance, seeking to get back their deposited money. The firm has halted the disbursement of new loans due to fund crunch.
BB’s observation of the firm's overall financial situation and an investigation carried out by Ziadul Islam of Amader Shomoy paint this picture of the troubled firm.
Industry insiders are blaming the current troubles of Phoenix Finance on the firm’s Managing Director SM Intekhab Alam.
The firm has been incurring losses for the last two years. Despite this, the firm’s board approved the proposal to extend Alam’s tenure as the managing director of Phoenix Finance. Questions have been raised about this decision.
This proposal was then sent to the BB for approval, but the regulator did not agree to approve the move. Insiders say the firm’s financial situation has been worsening gradually since 2020.
Borrowers, who took out loans using their own names or by faking identities, are not paying back the firm. If the situation continues, it will be very difficult for Phoenix Finance to continue operations without fresh capital.
BB officials say among the financial sector irregularities found by the regulator, most point to the disbursement of loans with no or fake collateral. In many cases, the collateral was overestimated, while some loans were disbursed under fake guarantees.
Such irregularities are preventing many firms from taking effective measures, and Phoenix Finance is on this list as well.
A recent central bank observation on Phoenix Finance states that the firm is not getting back the disbursed loans as those were issued without enough deposits – without proper scrutiny and due diligence.
Besides, there is a lack of proper supervision in the loan recovery process, causing a steady and alarming rise in default loans. The firm is also witnessing a declining trend in other financial indicators.
The correspondent had sent an SMS to Phoenix Finance Managing Director Intekhab Alam on phone and WhatsApp on November 22, seeking comments on the matter. But he did not respond.
Later, the correspondent visited the firm’s head office in the capital’s Dilkusha area and asked an audience with the managing director at the reception. The reception official said Alam was not at the office.
The correspondent then asked to meet the chief of public relations at the firm. The reception official said the chief was not at the office either.
So, the correspondent gave his visiting card to the reception official and requested to speak to the firm’s managing director and public relations chief at their convenience. There was no response for the next 24 hours.
On November 23, the correspondent again called the Phoenix Finance managing director, but he did not respond. He later responded to a WhatsApp call.
The correspondent then requested to speak with Alam on November 26 to discuss the central bank's observation of Phoenix Finance’s overall financial health. Alam declined to meet in person, and said, “Make a report if you have the observation, I have no comment on the matter.”
Sources say the BB had held a meeting with six financial institutions, including Phoenix Finance on October 13 this year, discussing their liquidity crisis, failure to maintain CRR and SLR, provision shortfalls, availing the deferral facility, and inability to pay back customers after maturity of schemes.
At that meeting, the Phoenix Finance managing director blamed the firm’s ongoing poor financial health on the Covid pandemic, adding that the 2nd phase of this crisis is behind the firm’s financial woes.
He added that nearly 40 per cent of the Phoenix Finance loans are stuck in lawsuits.
“The firm’s board of management is planning to reschedule a few more loans within the next December in a bid to curb the amount of default loans. The firm is also continuing their efforts to increase its capital,” Alam said at the meeting.
