What is the purpose of a single borrower exposure limit? It is to ensure that a bank's fortune is not tied to the ebb and flow of a conglomerate's business.

But this rule, documents show, was not enforced by state-owned Janata Bank in the case of Beximco Group, arguably the largest conglomerate in the country led by Salman F Rahman, the private industry and investment affairs adviser of former prime minister Sheikh Hasina -- a post that afforded him the rank of a minister.

This has left the health of the state-owned bank in a precarious position: about 49 percent of Janata's outstanding loans have gone bad -- and 37.5 percent of the defaulted loans are of Beximco Group, whose vice-chairman Salman was put on ten-day remand yesterday.

At the end of June, Janata's total exposure to Beximco Group stood at Tk 25,000 crore, which is about 950 percent of the lender's paid-up capital.

Banks are not allowed to lend more than 25 percent of their paid-up capital to a single party. At the end of June, Janata's paid-up capital stood at Tk 2,314 crore.

Read more

Salman F Rahman, Anisul Huq held in Sadarghat: DMP chief

What's more, as much as 72 percent of Beximco's outstanding loans with Janata have defaulted, documents show.

Of Janata's total disbursed loans of Tk 98,000 crore, 25.51 percent were given to 30 companies under the Beximco umbrella. And 26 of the 30 companies breached the single borrower exposure limit.

Salman, who was a member of parliament from Dhaka-1 (Dohar-Nawabganj) from 2018 until the dissolution of the 12th parliament on August 6, took out huge volumes of loans with the help of the Janata board and central bank higher-ups bypassing banking rules and regulation, The Daily Star has learnt from several Janata officials of past and present.

And the loans have increased at a brisk pace over the last three years.

In 2015, Beximco and its concerns' loans amounted to Tk 2,045 crore, which increased to Tk 6,400 crore in 2020. At the end of June, the figure hit Tk 25,000 crore.

Between July 2021 and July 2022, Beximco opened nine new companies; in just one month of 2022, it created eight new companies and availed loans in the name of those companies, documents show.

Salman, vice-chairman of Beximco Group, used his clout in the Sheikh Hasina administration to get the central bank to grant special approval for large loans, the Janata officials said on the condition of anonymity to speak candidly on the issue.

For instance, on August 1 last year, the Bangladesh Bank gave a no-objection certificate to extend loans amounting to Tk 479 crore to Beximco although the amount violated Janata's single borrower exposure limit.

Despite objection from the Department of Off-Site Supervision, the central bank wing responsible for monitoring and regulating banks, then governor Abdur Rouf Talukder gave the exemption to Beximco.

"This kind of exemption from the top undermines our efforts to establish good governance in the sector," said a top BB official on the condition of anonymity.

At that time, BB Spokesman Md Mezbaul Haque told The Daily Star that the exemption was granted for the purpose of recovering the loans.

SM Mahfuzur Rahman, chairman of Janata Bank, told The Daily Star then that the lender provided the loan only after getting approval from the central bank.

Salman also used his political clout to always reschedule loans and get easy terms such that Beximco was not grouped with bank defaulters, the Janata officials said.

For instance, the business group -- which has interests in textiles, pharmaceuticals, PPE, ceramics, real estate, construction, trading, marine food, ICT, media, DTH, financial services and energy -- rescheduled a major portion of its loans in June 2022 and the rest in June last year.

A large portion of those loans had defaulted and a fresh rescheduling package was placed at the bank's board meeting on July 30.

The proposal was not approved, documents show.

"That's why, about Tk 18,000 crore of Beximco's loans have turned bad," said a Janata official on the condition of anonymity for fear of reprisal.

Of the loans that have gone sour, Tk 5,030 crore is from the Export Development Fund, which was formed by taking funds from the country's foreign currency reserves.

Asked about Janata's hazardous exposure to Beximco, Md Abdul Jabbar, the bank's managing director, said some of the loans were approved or extended from the branch level and were not placed at the board meeting.

As much as 60 percent of the loans were taken from one branch: Janata's local office in Dilkusha, Motijheel, documents show.

"That is why a single group availed a huge amount of loans. That type of misuse has come down after my appointment as the MD. I did not allow further deterioration of the financial health of the bank," he told The Daily Star yesterday.

Jabbar was appointed the MD on a three-year contract on April 13 last year.

Once one of the most reputed banks in Bangladesh, Janata's financial health worsened thanks to a series of loan scams involving AnonTex and Crescent.

Its other large borrowers are S Alam Group, AnonTex, Crescent, Orion Group and Ratanpur Group

In 2017, Janata Bank's bad loans stood at Tk 5,818 crore. At the end of June, it stood at Tk 48,000 crore.

At the end of June last year, Janata had a capital shortfall of Tk 2,189 crore, according to data from BB.

Beximco Group declined The Daily Star's request for comment.