BB backtracks on suspending foreign trades by 3 JB branches

Bangladesh Bank has backtracked on suspending foreign trade financing offered by the irregularities-hit three branches of Janata Bank.

The latest decision was taken on Wednesday after a meeting with the state-owned lender’s managing director, which comes just a day after the suspension order.

The suspended branches were Janata Bhaban Corporate Branch, Dhaka Janata Bank Local Office Branch, Dhaka and Sadharan Bima Bhaban Corporate Branch, Chattogram, due to huge irregularities related to the export development fund (EDF) facility misuse.

The central bank’s erratic decision drew strong criticism from stakeholders and experts. 

“It’s nothing but a weakness of the central bank,” said a veteran banker asking not to be named.

The BB’s such backpedaling is against bringing discipline and corporate governance to the banking sector, said the banker.

On July 26, the BB wrote to Janata Bank Managing Director and CEO Abdus Salam Azad warning that the bank repeatedly opened EDF letter of credits (LCs) in favour of the same client without confirming the repatriation of export proceeds under the EDF facility.

“As a result, the bank is misusing the EDF facility,” said the BB’s letter.

The BB had also ordered Janata Bank to suspend the issuing of standby letter of credit (SBLC) against foreign loans.

“After detecting some irregularities in the state-owned bank, the BB imposed some restrictions on foreign trade financing of the branches,” BB spokesperson Md Serajul Islam told The Business Post. 

The Janata Bank managing director did not receive the repeated phone calls until filing the report.

However, a high Janata Bank official said, “If the central bank did not withdraw the suspension order, we may face problems financing several government mega projects.”

After Wednesday’s meeting, the BB asked Janata Bank to send the info of letter of credits, payment against document, demand loans and forced loans on a monthly basis to the central bank.

The bank was also asked to implement 100 percent trade financing and treasury modules under the   core banking solution within December 31 of this year.

The BB marked the bank as a high risk as it disbursed Tk 10,280 crore in loans during the five months of this year. Of the figure, demand loans accounted for 72 percent.

Janata now has the highest amount of default loans in the banking sector and now it faced huge liquidity shortfall due to the massive loan irregularities and scams, according to a BB high official.

The bank deposits stood at Tk 97,819 crore and loans at Tk 77, 905 crore as of Wednesday.