Delay worries depositors as liquidation of People’s Leasing stalls

HIghlights:

• People's Leasing has 6,000 depositors
• As of December 2019, the People's Leasing received Tk2,036 crore in deposits
• About 37 percent of the deposits came from individual depositors
• The institution's total outstanding loans were Tk1,131crore
• Over 66 percent of the loans were defaulted

Former chief justice late Mustafa Kamal had deposited a large amount of money in People's Leasing and Financial Services.

Later, his daughter, renowned singer Nashid Kamal, her uncle Mustafa Zaman Abbasi and several other relatives also invested money in the non-bank financial institution.

Nashid Kamal said her uncle deposited all his savings in the organisation, and both of them used to run their families with the incomes from the deposits.

Now they are very worried as their fate is in the balance because the legal process of the People's Leasing liquidation case has got stuck in the High Court due to the coronavirus pandemic.

Nashid Kamal said, "My uncle has grown old and has no other source of income. Now it has become very tough for both of us to run our families amid the present crisis."

All of the 6,000 depositors of People's Leasing have a similar sad story, and are passing each moment in serious tension as they do not know when and how they will get their money back.

They also want People's Leasing to be reformed instead of being liquidated.

As of December 2019, the People's Leasing received Tk2,036 crore in deposits, about 37 percent of which came from individual depositors. During the same time, the institution's total outstanding loans were Tk1,131crore, over 66 percent of which were defaulted loans, according to central bank data.

Barrister Tanjib-Ul-Alam, a lawyer of the Bangladesh Bank, told The Business Standard that a special audit report on People's Leasing was submitted to the High Court on March 10 this year to complete the liquidation process.

However, the court could not hold any more hearings on the issue following the submission of the report as all the court activities were halted by the pandemic, he added.

According to the audit report, the depositors are owed around Tk2,000 crore while different individuals and organisations owe Tk1,812 crore to People's Leasing.

However, the High Court started virtual benches from May 10 to resolve some emergency issues, and the chief justice gave responsibility to a virtual bench for holding hearings three days a week on emergency issues as per the company and bank company law.

But People's Leasing could not make it to the daily case list of the court during the pandemic as the hearing on it required a long time, according to sources at the Supreme Court.

Sirajul Islam, executive director and spokesperson of the Bangladesh Bank, told The Business Standard, "We have submitted the audit report to the High Court and are now waiting for the court's directives."

The Bangladesh Bank appointed Md Asaduzzaman Khan, deputy general manager of the central bank's financial institutions department, as the liquidator of the People's Leasing following a High Court order in July last year.

The People's Leasing had been counting losses since 2015. The government gave permission for its liquidation as its financial health deteriorated badly because of loan irregularities. The financial institution had not been able to repay depositors' money despite maturity of their funds because it failed to realise money from loan defaulters.

In 2014, the central bank learnt about various irregularities at the People's Leasing. An investigation found that many of its directors were involved in financial mismanagement.

Later, the Bangladesh Bank dismissed its board of directors and formed a new one. At the same time, it appointed an observer for the non-bank financial institution.

At one stage, the central bank sent a letter to the finance ministry for the liquidation of People's Leasing.

On June 26, 2019, the finance ministry gave permission to liquidate the institution responding to the appeal of the central bank.

On July 14 last year, the Bangladesh Bank filed a petition at the High Court seeking permission to liquidate People's Leasing.

Then the High Court bench of Justice Mohammad Khurshid Alam gave the order to start the liquidation process.

The central bank appointed the liquidator as per the directive. The liquidator is supposed to take the next steps regarding how and in which process the depositors' money will be paid back.

A Bangladesh Bank official said the depositors want their money back, but the central bank can do nothing now beyond the directives of the High Court.

Only around Tk15 crore is in the account of the People's Leasing now. If the amount were Tk100 crore, a proposal could be placed to repay the small depositors to some extent under a particular scheme through the court, he also said.

Depositors want People's Leasing's reformation, not liquidation

Khaled Mansur Trust, which used to finance 15 educational organisations for orphans and destitute children, deposited Tk10 crore in the People's Leasing in 2014. It ran the 15 institutions with the money it got in the form of interest on the deposit.

The trust drew money from the People's Leasing in January 2018 for the last time. It wanted to get back its money but failed. Now, it cannot bear the educational expenses of the children.

Aziz Haque, coordinator of the trust, said they doubt whether they would get their money back at all.

Another individual depositor Samia Binte Mahbub said, "Both my husband and I have lost our jobs due to the pandemic. We have kept all of our savings (Tk50 lakh) in the People's Leasing. After February 2018, it did not give us any interest on our deposit. Now, we are going through acute financial difficulties."

The individual depositors have demanded reformation of the People's Leasing instead of its liquidation, like Farmers Bank.

They have also sought the prime minister's intervention in the matter to help them get back their money.

At the same time, they demand punishment of the people responsible for the terrible situation.

Mohammad Atiqur Rahman Atiq, chief coordinator of the People's Leasing's depositors, said, "We urge the authorities concerned to reform the People's Leasing instead of liquidating it, and then give back our money."

Barrister Majbaur Rahman Chowdhury, a lawyer on behalf of the liquidator, said the Bangladesh Bank should appeal to the High Court if it wants to reform the People's Leasing mentioning a specific proposal of repaying the depositors.

Ahsan H Mansur, executive director at the Policy Research Institute, told The Business Standard that this is the first time in Bangladesh that an initiative of liquidating a financial organisation has been taken.

If the Bangladesh Bank wants to reform People's Leasing, it can take an initiative to do it. But,the depositors' money should be repaid as soon as possible, he also said.

Otherwise, investors and depositors will lose trust on financial organisations. Besides, questions will arise about the economy and the banking sector, he added.