Using a bank as a family wealth

National Bank has recently become top news for the wrong reason.

Once among the top performing banks in the country, it has become an example of how flouting of banking regulations, mismanagement of loans, financial irregularities and shabby treatment of its top executives has brought it to its knees. 

The latest transgression of the National Bank directors has come to prominence again after Exim Bank filed a case against Sikder Group Managing Director (MD) and National Bank Director Ron Haque Sikder and his brother Dipu Haque Sikder for allegedly torturing and shooting at its two top executives over a Tk500 crore loan, according to the complaint to police. 

Ron Haque Sikder and Dipu Haque Sikder allegedly tried to kill Exim Bank MD Mohammad Haider Ali Mia and Additional MD Mohammad Firoz Hossain by shooting them as they had allegedly refused to appraise the value of Sikder Group's property offered at collateral at a higher level for the Tk500 crore loan, according to the statement of the case filed by the Exim Bank with Gulshan Police Station on May 19, 2020.

The incident is now the most discussed issue in the banking sector. However, people in the banking circle are not surprised at this, say industry insiders.

Although this is a personal issue, Sikder Group used National Bank to provide an explanation of the issue. 

Eight days after the case had been filed, senior lawyer Abdul Baset Majumder gave the explanation on behalf of National Bank.

According to the explanation, Ron Haque did not apply for any such loan to Exim Bank and that the case was filed to socially malign him, the NBL, and its board of directors.

When contacted, Md Serajul Islam, executive director of the Bangladesh Bank said the incident would leave negative impacts on the reputation of the entire banking industry. 

He, however, said that the central bank would not intervene in this dispute until Exim Bank seeks help from the regulator.

Little regard for laws

The bank has never complied with the rule of limiting the appointment of the maximum number of members from a family as directors.

The National Bank board of directors currently has six members from the Sikder family, although the Banking Company Act allows maximum four family members on a bank's board. 

The directors are Zainul Haque Sikder, owner of Sikder Group, his wife Monowara Sikder, daughter Parveen Haque Sikder, two sons Rick Haque Sikder and Ron Haque Sikder, and his nephew Jonas Sikder Khan. 

Moreover, all other important committees of the bank are formed with members of the Sikder family.

The bank has the third-highest amount of deposits among private commercial banks in the country as of January this year. According to Bangladesh Bank data, the total deposit of the bank stood at Tk36,109 crore at the end of January this year.

However, National Bank's default loans more than doubled in the last three years because of massive irregularities in the loan approval process that is completely controlled by the Sikder family. 

The total amount of non-performing loans of the bank surged to Tk2,776 crore in December last year, which was 8 percent of its total outstanding loans, Bangladesh Bank data reveal. 

How directors misuse the bank's money 

Case-1: In 2013, the executive committee of National Bank approved a Tk132 crore house building loan to a school named Cambridge International. The loan was sanctioned for purchasing a building that was being constructed by Sikder Real Estate in the Rayer Bazar area in the city at that time. 

The building and the land were owned by Zainul Haque Sikder, Monowara Sikder and other members of the family. Monowara was chairman of the executive committee of the bank. 

However, the school existed only on paper. The Sikder family had prepared fake documents and took out the money in the name of the institution. 

The irregularities were found out during an inspection by the Bangladesh Bank.   

The central bank conducted a detailed investigation into National Bank in 2014 and found several hundred instances of irregularities at every stage of banking activities including loan disbursement, loan classification, recruitment of employees, and taking rent for office space from Sikder Group. 

The inspection report showed how members of the Sikder family were misusing public money by controlling the bank. The Business Standard obtained a copy of the full investigation report. 

After 2014, no further detailed investigation was conducted into the bank by the Bangladesh Bank for unknown reasons. 

Case-2: National Bank spent Tk20 crore for its CSR (Corporate Social Responsibility) activities in 2012 and 2013.

While Bangladesh Bank introduced CSR expenditure of banks aiming to help the deprived and development of health, education and culture, the central bank inspection found that National Bank spent the money for purchasing a bus for ZH Sikder Medical College, sponsoring golf tournaments and BD Olympic Association in complete violation of the CSR guideline. 

In its inspection report, the Bangladesh Bank stated that the CSR money of the bank was spent for the benefit of a group of people. 

Case-3: The bank opened 20 new branches in 2013. The Bangladesh Bank had selected six important branches among those to scrutinise their expenditure. 

The inspection found that on average, Tk1 crore was spent for the decoration of each of the branches. However, no tender was floated for such large amounts of purchases for decoration works, although call for tenders is mandatory for any purchase of above Tk50,000. 

Case-4: In 2011, National Bank entered into a lease agreement with Zainul Haque Sikder Medical College and Hospital for a floor space in the Shimanto Square building. 

According to the agreement, the bank was supposed to pay electricity, gas, and water bills to the space owner after the utility services sent their bills. But the bank was found paying bills in advance to a third party, which was completely illegal.

Case-5: An investigation report prepared by the Bangladesh Financial Intelligence Unit (BFIU) in January this year found another loan scam of Tk335 crore of National bank. The Sikder family was involved with this. 

According to the report, the loan was taken out in the name of Hasan Telecom. The executive committee of the board of directors approved the loan without proper scrutiny.

The land offered as collateral for the loan was bought from a company owned by the chairman of National Bank. But the survey company assessed the price of the land at 42 times higher than the price at which it was bought, alleged the report.

According to the report, over Tk60 crore was transferred to different bank accounts linked to members of the National Bank board of directors.

Of that money, Tk23.8 crore were allegedly deposited in the account of Rick Haque Sikder, a director of the bank, in two transactions, and Tk10 crore was deposited in the account of PowerPac – a company owned by National Bank chairman Zainul Haque Sikder and his two sons Rick Haque Sikder and Ron Haque Sikder.

Meanwhile, Tk20 crore was transferred to the account of Sikder Real Estate.

The Anti Corruption Commission also started to investigate the issue following the report of the BFIU.  

Violation of law in forming board

The Banking Companies Act 1991, amended in 2013, allowed two members of a family to be included in a bank's board. However, the Sikder family had five members on the board of National Bank during that time. 

Later in 2018, the government revised it's amendment in the face of pressure from bank directors and allowed four members from a family in the board. Still, the Sikder family has six members on the National Bank board. 

Other important committees of the bank also consist of members of the Sikder family. For instance, the executive committee of the bank contains six directors and four of them are from the Sikder family. As a result of this, the Sikder family enjoys overwhelming voting powers and they can influence important decisions. 

The risk management committee, which is very vital for a bank to assess risk of loans, comprises two members, both are from the Sikder family. 

Shabby treatment of top executives 

So far, no top executive of the bank could complete their tenure at the bank. 

At least four managing directors of National Bank have had to leave the bank under severe pressure and humiliation from its directors since Sikder Group took over it in 2009.

The owners of Sikder Group, who are also the directors of National Bank, care little about complying with the Banking Company Act or the banking rules of the Bangladesh Bank.

Soon after the Bangladesh Bank had revealed massive irregularities in the bank in 2014, the Sikder family blamed the then managing director of the National Bank AKM Shafiqur Rahman for helping the central bank discover the corruption. 

Under pressure and humiliation from the directors of Sikder Group, Rahman stepped down before completing his tenure. 

When contacted, Rahman refused to comment on the Sikder family saying, "I want to forget those days."

"I did as much as I could for the bank ," he said. 

Within a week of his resignation in October 2014, the Bangladesh Bank appointed an observer to the bank.

Several months later, the Bangladesh Bank issued a guideline to protect managing directors of banks ordering banks to take prior permission from the central bank before firing top executives. 

Shafiqur Rahman was not the only one who had to resign from his position at the National Bank under pressure. Three more managing directors including Md Abdur Rahman Sarker, AFM Shariful Islam and Shamsul Huda Khan had to leave the bank before completing their tenure under pressure and humiliation. 

The Business Standard has talked with various retired officials of the bank in this regard. However, none of them wanted to be named in the report. 

After the resignation of Rahman, National bank ran for one year without a managing director as nobody wanted to work in that position there. 

Finally, Choudhury Moshtaq Ahmed, the then acting managing director of the bank stepped in as managing director. However, he also had to go through humiliation. 

Because his name was similar to Khondaker Mostaq Ahmad, convicted killer of Bangabandhu Sheikh Mujibur Rahman, he was asked to change his name before joining the bank.

Eventually, Moshtaq changed his name to Chowdhury Rasel Ahmed in the managing director's proposal to the central bank. 

Health of the bank 

National Bank started commercial operation in 1983 and got listed with the Dhaka Stock Exchange in 2000.

The bank made a net profit of Tk182 crore in 2018, which was Tk207 crore in 2016.

Each share of the bank has been trading close to its face value of Tk10 from the beginning of this year, according to the DSE. 

When contacted, ASM Bulbul, additional managing director, and also the spokesperson of the bank denied commenting on the bank's present financial health.