4 state-run banks facing credit concentration risk

A major portion of the loans disbursed by four state-run banks is concentrated among a few borrowers, which may put the entities and their depositors’ money at risk.

According to Bangladesh Bank (BB) data, the banks — Sonali, Janata, Agrani and Rupali — lent Tk 84,393 crore in total among 110 companies as of December last year.

The figure for concentration credits is for funded loans. The latest BB report on the issue did not include the non-funded loans.

Economists say the “favoured” loan approvals have increased the credit concentration risk at these state-run banks and the depositors are facing the risk of loss because the loans are only given to a few selected borrowers.

Until December, Sonali Bank Limited lent Tk 24,332 crore to 22 companies — 18 public sector companies and four from the private sector. This amount is 35.23 per cent of the total amount of loans — Tk 69,060 crore — the bank has disbursed.

Two of these large borrowers jointly hold a defaulted loan of Tk 2,203 crore till this period. A senior bank official claimed that the major portion of large loans has gone to public sector companies.

At least 35 per cent of Sonali Bank’s total loans, including large loan concentrations, came from its top five branches which are in Dhaka, said the BB data.

Meanwhile, Janata Bank Limited disbursed Tk 34,301 crore in loans among 31 companies — four public sector companies and 27 from the private sector — as of December. This amount is 49.02 per cent of the bank’s total loans, Tk 69,966 crore.

Three of these 31 companies have become defaulters with bad loans of Tk 8,238 crore.

Janata Bank’s financial health has deteriorated mainly because of several such borrowers, including AnonTex Group and Crescent Group.

The bank lent up to Tk 10,000 crore to two groups, going past its single-borrower exposure limit, according to BB investigation findings — which also said that AnonTex, a garment manufacturer, was also involved in money laundering.

On the other hand, Agrani Bank Limited disbursed Tk 15,893 crore in loans among 36 companies — 33 private sector companies and three from the public sector — until December.

This amount is 26.58 per cent of the bank’s total loans, Tk 59,790 crore.

During the same period, Rupali Bank Limited gave out Tk 9,867 crore in loans among 21 private sector companies. This amount is 25.90 per cent of the total loans — Tk 38,083 crore — the bank has disbursed.

The bank’s large borrowers include Beximco, Orion Group, Mother Textile Mills, Madaripur Spinning Mills, Badar Spinning Mills and Dolly Construction Ltd.

Talking to The Business Post, Zahid Hussain, former lead economist of the World Bank’s Dhaka office, said the political interference in approving loans is widespread in the state-run banks, which is the main reason behind the large loan concentration among a few borrowers.

He said most of the weak state-run companies get priority from these banks for loans but the companies are failing to pay back the money.

The banks cannot avoid blame and responsibility for the soaring default loans because they are approving loans without due diligence or considering the repayment capacity of borrowers, added the economist.