Janata Bank turns down Beximco's request for funds

Janata Bank has rejected the Beximco Group's request for a Tk60 crore loan to pay employees' salaries for October, according to a letter sent to the finance ministry by the bank.

In the letter, the bank's Chairman M Fazlur Rahman states that Janata Bank is not in a position to take on the financial risk that new funding would entail.

The group applied for the loan to the bank on 4 November as its workers staged protests demanding unpaid salaries.

Earlier, the bank approved a Tk55 crore loan for the group, owned by Salman F Rahman, to pay employees' salaries for August. The loan was granted following the opinion expressed by Bangladesh Bank Governor Ahsan H Mansur and was issued without a letter of credit.

Salman F Rahman, who was private sector adviser to former prime minister Sheikh Hasina, is currently in jail facing trial on various charges, including involvement in killings during the July Uprising.

The Janata Bank's letter, issued on 14 November, mentioned that the bank is owed Tk23,407 crore by 28 companies of the Beximco Group, a large portion of which is classified as non-performing, with the remainder being overdue.

The letter said that according to the Bank Company Act, the bank is not allowed to provide loans to defaulting customers.

When contacted by TBS, Janata Bank's chairman declined to comment on the issue.

Dr Zahid Hussain, member of the task force on banking sector reforms, told TBS that Janata Bank's decision to stop further loans to Beximco Group is logical.

Janata Bank had previously violated regulations by providing funds to the defaulting Beximco Group, he said.

He added that the companies are using employees' protests in demand of salaries to blackmail banks.

"It is not feasible for banks to continue paying salaries in this manner every month. Therefore, if a company fails to pay employees, it would be better for the government to establish a package to lay off the workers. In this case, the company's future must be determined," Zahid Hussain said.

Dr Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), told TBS that the Beximco Group needs around Tk82 crore to pay salaries to its workers every month.

"Such a large amount is not feasible for banks to provide every month. In this case, Beximco's companies could be sold off, with workers gradually phased out."

She mentioned that when the Hallmark Group's companies were auctioned, no buyers showed interest. She expressed her doubts as to whether there would be any buyers for Beximco's companies. "As a result, there is no simple solution to the crisis that has emerged," she said.

According to Janata Bank, as of 31 October, the Beximco Group has around Tk1,287 crore in unrepatriated export proceeds, owing to which packing credit and back-to-back LC liabilities remain unpaid.

Additionally, although Janata Bank's nostro account has been settled, the Beximco Group has not paid around Tk564 crore under the Export Development Fund liability.

As of 12 November, the Beximco Group has repatriated Tk90.65 crore of its export proceeds, against which the group received Tk81.58 crore in advance under packing credit and back-to-back LC. The remaining amount will be adjusted against service charges as also the Beximco Group's other outstanding liabilities with Janata Bank.