Janata is most vulnerable bank in Bangladesh now

Capital shortfall stood at Tk 5,475cr
Provision shortfall Tk 5,255cr
Net loss Tk 5,054cr, NPL Tk 13,622cr

Mahfuja Mukul: The state owned Janata Bank is treated as the most vulnerable bank in the country due to heavily increase of its capital and provision shortfall. The capital shortfall of Janata Bank till December 2020 has stood at Tk 5475 crore, while the provision shortfall stood at Tk 5255 and the net loss was Tk 5,054 crore, against its paid up capital of Tk 2314 crore.
At the end of 2020, Janata Bank’s defaulted loans stood at Tk 13,622.5 crore.
In a situation, the bank authority wants to windup the bank then the government has to provide at least Tk 30,000 crore from the treasury, told a source of the bank. But the top management of the bank is reluctant to improve the financial health of Janata Bank.
Until December 2020, it did not have any shortfall, but in the next three months the shortfall of money kept aside against default loans stood at Tk 5,255 crore, according to a Bangladesh Bank.
At present, the provision for non-classified loans is 0.25 percent to 5 percent. And for default loan, the rates are separate for different categories. If the loan treated as sub-standard, the rate is 20 percent; if doubtful it is 50 percent and for ‘bad and loss’ loans the provision rate is 100 percent. It is worth mentioned that the bank has to keep provision from its profit against the loan loss and security for regular loans, avoiding any unseen risk.
Though Janata Bank had a huge provision shortfall, its capital adequacy fell short of only Tk 416 crore by the end of March 2020. In December, the figure was Tk 5,500 crore.
Janata Bank’s Managing Director Abdus Salam Azad told Daily Industry yesterday that the situation will be normal after this June closing and within next two years it would be fully normal.
Due to the provision shortfall of Janata Bank, govt banks saw their combined provision shortfall double to Tk 10,561 crore. It was close to Tk 5,000 crore in December.
The BB sources told Daily Industry that about 88.17 percent default loans turned into bad loans by March, which was 87 percent in December. The recovery of bad loans is very complex and needs a long legal procedure to complete. Often those are never recovered, they added.
If bad loans are not recovered in three years, they are to be written off.
Janata Bank’s capital shortfall is the highest among state-owned banks at the moment. The capital shortfall of Janata Bank stood at Tk5,475 crore at the end of December last year – the largest for a state-owned bank.
The accumulated capital deficit in Sonali, Janata, Agrani, and Rupali banks stood at Tk12,195 crore at the end of December 2020.
Janata bank incurred a net loss of Tk 5,054 crore in 2020, mainly as the bank fell prey to loan irregularities and money laundering years ago by apparel manufacturers Crescent and AnonTex Group.
This has gotten the Bangladesh Bank concerned, prompting it to form a committee in March this year to find ways to meet the capital shortfall for state-owned banks.
Speaking to Daily Industry, Md Serajul Islam, central bank spokesperson and executive director, said: “State-owned banks are a crucial part of the financial system. They also provide many free services to the government.
“Some have been able to cover the capital deficit while some lag behind. A committee has been formed to find ways of improving the capital base of those state-owned banks that are lagging,” he added.
The banks and the committee have been asked to provide sustainable action plans on improving their financial health other than just being recapitalized by the government, he further said.
From January 2017 to February 2018, Crescent Group scammed and defaulted loans in the amount of Tk 3,443 crore of the bank, according to a case filed by the Anti-Corruption Commission (ACC) in 2019.
A big portion of the embezzled money was siphoned off abroad according to case papers. Crescent Group Chairman MA Kader, his brother Abdul Aziz, who is the head of Jaaz Multimedia, and 13 others were accused in the cases.
On the other hand, 22 companies of AnonTex Group were given about Tk 3,527.9 crore in loans by Janata Bank between 2010 and 2015, which is more than 25 percent of the lender’s capital base and in violation of the single borrower exposure limit set in the Bank Company Act 1991.
As of September last year, the total loans held by the group stood at Tk 6,528.6 crore. Of the sum, Tk 2,800 crore was default loans that were rescheduled in 2019.
Although Janata Bank showed a profit of Tk 24.64 crore in the final balance sheet by taking a provision deferral of Tk 10,963 crore from the central bank in 2019, it had incurred a loss of Tk12,000 crore.
It was a trick by the top management well ahead of taking fresh renewal of job for 3-year tenure. Abdus Salam, the managing director tactfully makes the balance sheet showing Tk 24.64 crore as profit, keeping over Tk 12,000 crore as net loss.
Global Economist Forum (GEF), a general consultant member organization of the United Nations, demands punishment for such financial crimes done by the bankers for their personal interest. The BB and ministry of finance have to look into the matter seriously, the GEF president Dr Enayet Karim mentioned.