This was just another example of how the Chattogram-based corporate juggernaut was influencing the banking industry in the country; up to 90 percent of the loans that a state-run Janata Bank branch disbursed were for the S Alam Group.
Based on bank paperwork, S Alam Group received Tk 8,216 crore from Janata’s Sadharan Bima Bhaban Corporate Branch in Chattogram. This amount is 167 percent above than the branch’s exposure limit for a single borrower.
Add Tk 2,233.45 crore more from Janata, and the business conglomerate had taken Tk 10,449.45 crore, or 451.57 percent of the paid-up capital of the financially troubled state-run bank.
Legally, a bank cannot lend more than 25 percent of its paid-up capital to one customer. As of June of this year, Janata had paid-up capital of Tk 2,314 crore. Of the Tk 98,000 crore in disbursed loans at the end of June, 10.7 percent went to S Alam, which owns controlling stakes in eight banks.
Of the bank’s outstanding loans, up to 49 percent have turned bad, endangering the bank’s financial stability.
In response to this, the bank on June 25 rescheduled for a period of four years the Tk 1,844.60 crore loans that the six S Alam Group companies had taken out. This was done in violation of regulations, but with special approval from the central bank.
Of the total, S Alam Refined Sugar Industries received Tk 1,038.75 crore, S Alam Trading Company received Tk 1,186.43 crore, S Alam Vegetable Oil received Tk 696.42 crore, Global Trading Corporation received Tk 221.13 crore, and S Alam Cold Rolled Steels received Tk 1,229.55 crore.
Despite S Alam Group having outstanding loans of Tk 8,895.91 crore, the companies were granted the ability to reschedule.
In accordance with banking regulations, a client may only be eligible for a new loan rescheduling if it falls within the allowed limits.
This was not the case for the S Alam firms, whose rescheduled obligations totaled Tk 4,372.28 crore as opposed to Tk 3,250 crore, the cap.
To reschedule the loans, however, the central bank issued a certificate of no objection on July 28.
But the central bank included several restrictions in its no-objection certificate, such as the loan amount cannot be extended further and must be brought within the allowed limits by December 31, 2025.
Both Md Abdul Jabbar, managing director and chief executive officer of Janata Bank, and Saiful Alam, chairman of S Alam Group, were unavailable for comment.
