National Bank cannot give loans without reducing ADR: BB

The National Bank will not be able to issue new loans if the Advance Deposit Ratio (ADR) of the bank is not reduced to the level set by the central bank.

Bangladesh Bank announced the ban in a letter sent to the managing director of the National Bank on 3 May.

The central bank has also fixed large loans and single customer loan limits for the National Bank. Besides, the approval of the central bank has been made compulsory in appointing senior officials in the bank.

The BB also wanted to know the loan collection situation of the top customers of the bank.

The letter, signed by Bangladesh Bank's Department of Off-site Supervision (DOS) General Manager Md Anwarul Islam, said no new loans can be disbursed until the bank's ADR limit is lowered to 87 percent, as fixed by the central bank.

Currently, the National Bank's deposits are around Tk43,000 crore and loans are around Tk41,000 crore. The loan-to-deposit ratio stands at 92 percent.

If the amount of loan is given beyond the fixed limits, the deposit falls at risk. Therefore, to protect the interests of the depositors, National Bank has been banned from lending money, the letter said.

Such instructions have been given to stop the distribution of anonymous loans by the National Bank, it reads.

According to the letter, after the death of National Bank Chairman Zainul Haque Sikder on 10 February, his wife Monowara Sikder took over the position. Although no board meeting has been held since then, the bank has given a loan of around Tk500 crore. Questions have been raised about the beneficiaries of the loans disbursed.

After the death of the chairman, a power struggle over control of the bank started within the Sikder family. Some top officials of the bank also got involved in irregularities. As a result, this first generation bank has been identified as a troubled bank.

The central bank's directive further states that the growth in loan disbursement cannot exceed 10 percent. Besides, the amount of large debt cannot be more than 5 percent of the repaid capital or more than Tk153.32 crore. The current paid-up capital of the bank is Tk3,066.42 crore.

On the other hand, the single customer loan limit (Single Borrower Exposure Limit) cannot exceed Tk306.64 crore (including funded and non-funded). However, this condition will not be applicable in case of loan renewal.

National Bank will not be able to buy loans from any other bank. The loan repayment information of the top 20 borrowers of the bank has to be reported to the DOS of the central bank every month. In addition, in case of re-appointment or contractual appointment of advisors, consultants or senior officers of the bank, the approval of the central bank is required.