The central bank's inspection team did not perform properly to detect the irregularities at Bangladesh Industrial Finance Company (BIFC), a fact-finding committee found.

The committee cited the failure of the Bangladesh Bank team in its report submitted to the High Court recently.

The BB formed the committee in February 2021 in line with an order of the higher court aimed at finding out the anomalies at the non-bank financial institution (NBFI).

The financial institution fell into trouble when it was unearthed in 2020 that its liability was Tk 1,835 crore against assets of Tk 927 crore. As a result, it became uncertain whether the NBFI could return funds to its depositors upon maturity.

It happened mainly as Tk 847 crore was lent out but was not recovered. Of the sum, Tk 517 crore was given out to BIFC's sponsor Major (retd) Abdul Mannan's companies and his relatives, according to the report.

"It was BB's responsibility to detect the irregularities as per rules but its physical inspection was not carried out in a serious manner."

The team found that the NBFI provided more funds in loans than the amount approved and extended finances to a company against a loan that was actually sanctioned for another company.

The lender also did not classify some loans although instalments were not paid on time. No irregularities were detected by the BB as the inspection was completed without due importance, said the report.

The external auditor also failed to spot all the irregularities year after year. But if it had raised the flag earlier, funds embezzlement would not have happened, it said.

Speaking to The Daily Star yesterday, Abdul Mannan said: "The fund was lent to 42 companies in the span of 11 years and they paid back a significant portion of the fund. Then how could it be an embezzlement?"

"The companies already returned Tk 319 crore and it is audited. The companies are ready to pay back the rest of the fund, but BIFC filed a case against them so they are not paying the fund."

"My relatives are established industrialists, so they received the loans," Mannan said.

He claimed that when PK Halder took over the company in a hostile manner from him, a huge amount of funds was siphoned.

"So, they should be brought to book," he said.

Halder, a former managing director of Reliance Finance, and NRB Global Bank, and his associates swindled thousands of crores of taka from four financial institutions between 2009 and 2019, according to investigators of the Anti-Corruption Commission. The NBFIs include BIFC.

The fact-finding committee recommended taking action against all the culprits who were engaged in the irregularities at BIFC and making sure that they don't get appointments in any other banks or financial institutions.

It recommended allowing NBFIs to participate in the call money market and meet their fund requirements by issuing bonds.

The BB should take steps to improve the equity position of NBFIs and increase coordination among other regulators, the committee said. 

"The central bank should make it mandatory for NBFIs to take approval from it before appointing directors."

If an external auditor is punished for any wrongdoing, it should be announced to be incompetent to audit financial institutions, the committee recommended.

The central bank's officials should put their signature and their names on every page of an inspection report so that they can be identified.

The committee recommended including the officials of the Credit Information Bureau of the central bank in the inspection teams. It also suggested running special audits into NBFIs every year.

"The efficiency of the inspection teams should be enhanced," it added.