Commerce Bank, Janata run into a quagmire | The Daily Star
12:00 AM, January 27, 2021 / LAST MODIFIED: 04:57 AM, January 27, 2021

Commerce Bank, Janata run into a quagmire

Struggle to recover Tk 633cr deposits from six NBFIs

Bangladesh Commerce Bank and Janata Bank Ltd are in a difficult situation to recover Tk 633 crore they deposited with six non-bank financial institutions as the latter's financial health deteriorated because of massive scams and lack of good governance.

Private lender BCB and state-run Janata kept the fund with Peoples Leasing & Financial Services, First Finance, FAS Finance & Investment, Bangladesh Industrial Finance Company (BIFC), International Leasing and Financial Services (ILFS), and Premier Leasing & Finance Ltd several years ago.

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Although the funds have matured, the NBFIs are unable to return the money to the banks.

The two banks requested the central bank to intervene to help them realise the money. But they have received a feeble response from the regulator.

Recently, BCB has informed the central bank that as much as Tk 502 crore was stuck with the six NBFIs as of November 15 last year.

The NBFIs also have stopped paying interests to the bank since fiscal 2018-19, according to a central bank paper.

The amount, which was kept in the form of term deposits, can't be renewed as the NBFIs are not paying the interest against the fund.

"This has created an obstacle to carrying out the banking operation, including liquidity management and making profits from the fund," the bank told the BB.

BCB has served legal notices on BIFC and ILFS as part of its effort to file a case. But the lender has been forced to backtrack due to the central bank intervention.

"Against the backdrop, the bank has been in a quagmire," a senior official of the bank said.

The central bank has unearthed massive financial scams at a number of the NBFIs out of six. Some of them have failed to repay the deposits to common savers.  

Janata Bank deposited Tk 110 crore with Premier Leasing, ILFS, and FAS finance. The NBFIs have not paid any interests for more than one year, said Md Abdus Salam Azad, managing director of the state-run lender.

The interest of the deposited fund stood at Tk 21 crore, he said.

The bank wrote to the central bank in March last year, seeking permission to sue the three NBFIs. But the BB has suggested not to file any case as it will send a bad signal to the depositors in the NBFI sector, the BB paper said.

"We are in a difficult situation," Azad said.

Pritish Kumar Sarker, managing director of FAS Finance and Investment, said that the NBFI would repay the money in the quickest possible time.

"We are not getting deposits from the common savers at this moment. We have requested the banks to renew the term deposits," he said.

Abdul Hamid Mia, managing director of Premier Leasing & Finance, said his company was now paying the interests.

"We have already repaid Tk 100 crore to BCB. The rest will be returned soon."

Premier Leasing has requested Janata Bank to renew the term deposit, he said. 

Prashanta Kumar Halder and his associates embezzled a large amount of money from four NBFIs, creating a haphazard situation in the financial sector, according to a central bank report.

Halder, a former managing director of NRB Global Bank, misappropriated Tk 2,500 crore from ILFS, Tk 2,200 crore from FAS Finance, Tk 3,000 crore from Peoples Leasing, and Tk 2,500 crore from Reliance Finance between 2015 and 2019. He fled to Canada.

The central bank applied to the High Court in 2019 to liquidate Peoples' Leasing due to the deterioration of its financial health. The court accepted the plea and appointed a liquidator.

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