66% of loans in default: Janata Bank struggles to stay afloat

For the past decade and a half, the state-owned Janata Bank has held the top spot in discussions and criticisms within the country’s banking sector. Allegations persist that the bank has favored individuals and groups with political influence, granting them massive loans with minimal collateral. As a result, the bank has accumulated an enormous amount of non-performing loans (NPLs).

According to sources at Bangladesh Bank, Janata Bank’s total non-performing loans now stand at Tk 60,345.30 crore, which accounts for 66.15% of its total loan disbursement. The central bank’s latest report states that the bank has distributed a total of Tk 91,224.37 crore in loans.

Critics claim that a significant portion of Janata Bank’s loans has gone into the pockets of influential figures backed by the ruling Awami League government. In many cases, even the single-borrower loan limit was ignored, further escalating the risks.

It has been reported that Janata Bank has been particularly “generous” towards three major business entities: Beximco, owned by Sheikh Hasina’s former Private Sector Industry and Investment Adviser Salman F Rahman, S Alam Group, a Chattogram-based business conglomerate, and Ennatex. These three companies alone received Tk 35,000 crore in loans. Additionally, at least 20 other business groups collectively received another Tk 35,000 crore, bringing the total amount of loans disbursed to these entities to Tk 70,000 crore—the majority of which has now turned into non-performing loans.

A Janata Bank official, speaking on condition of anonymity, told Views Bangladesh that "A significant portion of our non-performing loans is held by a handful of borrowers who were highly influential under the previous government. Even when the bank took initiatives, the loan amounts were not repaid. Some of these borrowers are now in jail, while others are on the run, making loan recovery nearly impossible."

However, officials at Bangladesh Bank have a different perspective. They claim that while Janata Bank was highly enthusiastic about loan disbursement, it showed little interest in loan recovery. According to them, the bank has not taken any effective measures to collect the overdue loans.

Experts argue that the mortgaged assets pledged by loan defaulters should be identified, sold, or auctioned to recover the outstanding amounts. They also emphasize the need to investigate bank officials who were involved in approving these loans, as this could expose possible collusion between them and the defaulters.

They further stated that "Non-performing loans cannot be recovered simply through good advice. A concrete list of defaulters should be prepared, and strict legal action must be taken against them. Those who have already fled the country must be brought back, and their assets recovered. Otherwise, the fragile state of the banking sector will inevitably have a severe impact on the overall economy."

When asked about the non-performing loans, Janata Bank's Managing Director (MD) Mojibur Rahman told Views Bangladesh that "To reduce bad loans, we have already launched a 100-day action plan. This plan has two key components: deposit collection and loan recovery. We have introduced several new financial products to attract deposits, and they are receiving a strong response at the field level. If we achieve our deposit collection targets, we believe the crisis can be resolved."

He added that "For recovering large loans, we have already initiated legal procedures. Additionally, for borrowers who are genuinely struggling or have passed away, we are waiving interest to facilitate the return of the principal amount. For businesses affected by COVID-19 or other crises but still capable of recovery, we are rescheduling their loans. Through these measures, we aim to bring down the number of non-performing loans."

Request for Tk 10,000 crore Loan
Meanwhile, despite failing to recover its massive non-performing loans, Janata Bank has requested a Tk 10,000 crore loan from Bangladesh Bank at an interest rate of 4%. However, the country’s central bank has rejected the request.

According to a source at Bangladesh Bank, Janata Bank’s top officials met with the central bank on January 6 this year to discuss the bank’s overall financial situation. During the meeting, Janata Bank sought a Tk 10,000 crore loan to manage its ongoing crisis. However, Governor Dr. Ahsan H. Mansur refused to approve the request.

The source further stated that the Governor made it clear to Janata Bank officials that the central bank would not provide any financial support. Instead, he advised them to take effective measures to recover the money already disbursed to borrowers. He also suggested that if necessary, the bank should sell off the collateral assets to reclaim the overdue loans.

A Bangladesh Bank official, speaking anonymously to Views Bangladesh, said that "We have been advising them on loan recovery, but they are not taking any effective initiatives."
Regarding Janata Bank’s request for a loan from Bangladesh Bank, Managing Director (MD) Mojibur Rahman stated that "We requested a loan from Bangladesh Bank at an interest rate of 4%. It would have been beneficial for us if we had received it. However, due to liquidity constraints, Bangladesh Bank did not approve the loan. Nevertheless, given the strong response we are receiving in deposit collection, we believe we will be able to overcome the crisis. Of course, getting the loan would have been an advantage."
According to Bangladesh Bank data, the highest loan disbursement by Janata Bank has been to Beximco, a group owned by Salman F Rahman. The total loan amount to Beximco Group stands at Tk 20,753 crore.

The second-largest loan recipient is S Alam Group, which has borrowed Tk 7,832.73 crore under various company names. Out of this, Tk 1,215.16 crore has turned into non-performing loans.

Another controversial borrower in the banking sector is Ennatex Group, which took out Tk 7,755 crore in loans from Janata Bank. Shockingly, almost 100% of this amount has defaulted, with Tk 7,708.76 crore now classified as bad loans.

Additionally, serious allegations have emerged regarding embezzlement and money laundering of Janata Bank loans through its officials, particularly in the case of Ennatex Group. A complaint has been filed with the Anti-Corruption Commission (ACC) regarding these allegations. Following the complaint, the ACC has launched an investigation into the matter.

As part of the probe, the ACC has sent an official letter to Bangladesh Bank, requesting records and documents related to the transactions.

The Anti-Corruption Commission (ACC) has stated that there are allegations of embezzlement and money laundering involving loans granted to 22 companies under Ennatex Group. These irregularities were allegedly carried out in collaboration with bank officials through various forms of corruption and malpractice. The ACC emphasized that reviewing financial records is essential for conducting a thorough investigation.

According to Bangladesh Bank data, several companies have received large loans from Janata Bank, many of which have turned into non-performing loans (NPLs): Remax Footwear Limited borrowed Tk 1,077.62 crore, all of which has defaulted. Crescent Group took out Tk 2,089.54 crore, with Tk 1,806.76 crore classified as bad loans. Ratanpur Group received Tk 1,227.14 crore, which is entirely non-performing.

Janata Bank has also extended large loans to several other business groups, including Ranka Group → Tk 1,719.09 crore, Orion Group → Tk 2,854.42 crore, Thermex Group → Tk 1,944.77 crore, Shikder Group → Tk 829 crore, Janakantha Group → Tk 787.48 crore, Meghna Cement → Tk 674.72 crore, Lexco Limited → Tk 655.47 crore, Habib Hotel International Limited → Tk 635.45 crore, Ananda Shipyard → Tk 614.54 crore, BR Spinning Limited → Tk 574.22 crore, Chowdhury Group → Tk 658.45 crore, of which Tk 625.70 crore is non-performing.

The Bangladesh Bank report also reveals that several government-owned organizations owe significant amounts to Janata Bank: Bangladesh Agricultural Development Corporation (BADC) → Tk 4,373.93 crore, Bangladesh Petroleum Corporation (BPC) → Tk 3,623.75 crore, Bangladesh Chemical Industries Corporation (BCIC) → Tk 2,921.03 crore, Bangladesh Sugar & Food Industries Corporation → Tk 1,691.96 crore.