Bangladesh Bank has unearthed another string of scams at the Farmers Bank involving loans of around Tk 500 crore that were sanctioned to 11 companies in violation of banking norms and procedures.

Of the amount, loans of more than Tk 367 crore that the bank's Motijheel branch gave to 10 of the companies from November 2013 to November last year have become defaulted. Some of the firms are either obscure or little-known.

The central bank has held the private bank's former chairman Muhiuddin Khan Alamgir and ex-chairman of its executive committee Mahabubul Haque Chisty largely responsible for the scams.

The irregularities are gross -- some of those outright fraud -- ranging from sanctioning loans without any application to taking loans and not using any of that for the purposes those were meant for.

The new findings came up in a BB probe in December last year, a couple of years after the central bank detected scams involving Tk 400 crore at the Farmers Bank's three branches in the capital's Gulshan, Motijheel and Shyampur.

The latest BB investigation found at least 11 counts of irregularities in disbursing the loans to the 11 companies. They are NAR Sweaters Ltd, Advanced Development Technologies, Abeda Memorial Hospital, Index Housing, Al-Faruque Bags, Nahar Farmers Group, Apollo Trade International, Mollik Aquaculture Farm, Messers Premjoy, Mac Trading and Bangladesh Development Company.

Except for NAR Sweaters Ltd, all these companies have become defaulters with the bank.

The private bank also concealed information on the defaulted loans to show inflated profit, breaching the Banking Company Act 1991.

The bank's Motijheel branch resorted to “unfair means” to show Tk 367 crore given to 10 companies as unclassified loans though those already became defaulted, according to the BB.

The branch showed only Tk 60 crore as defaulted loans till September last year. But the BB probe found that the amount was more than Tk 619 crore. The private bank had disbursed loans of Tk 1,038 crore between November 2013 and November last year, said the BB probe report.

Two ex-directors of the Farmers Bank -- Alamgir and Mahabubul -- approved a major portion of the loans, abusing their position and without taking consent from other board members, it mentioned.

The bank's Motijheel branch gave loans of Tk 130 crore to NAR Sweaters Ltd in different phases between 2016 and last year though its head office rejected the firm's credit proposals.

The branch disbursed the funds to settle back-to-back letters of credit (LCs) opened by NAR Sweaters. The RMG company's outstanding loans stood at Tk 34.39 crore when the BB carried out the investigation, said the report.

The private bank will have to pay for the LCs and create long-term loans against the firm if it fails to repay the loans in due time, it said.

NAR Sweaters already had defaulted loans of around Tk 50 crore at the Islami Bank Bangladesh Ltd (IBBL) when it opened LCs with the Farmers Bank early in 2016.

Though the Farmers Bank management knew that NAR Sweaters had overdue loans with the IBBL, it allowed the firm to open LCs, a Farmers Bank official told this correspondent.

Asked, Shahabuddin Ahmed, commercial manager of the firm, said they filed a writ petition with the High Court in 2016 for having regularised its defaulted loans with the IBBL.

The HC issued a stay order, asking the BB not to show the loans as classified, he said. 

Shahabuddin further claimed his firm paid the Farmers Bank Tk 15 crore out of its dues of Tk 34.39 crore between January 1 and March 22 this year.

The RMG company will again open LCs with the IBBL as it has recently paid the bank Tk 2.67 crore to have rescheduled its defaulted loans, he added.

Besides, Advanced Development Technologies, a realtor, got the Farmers Bank's approval to a Tk 45-crore loan as working capital within hours of opening an account with its Motijheel Branch on February 28, 2016, according to the BB.

Usually, it takes at least a couple of months for a new client to get a bank's approval to a loan.

Three months later, the Farmers Bank approved another Tk 20-crore loan to the firm though it didn't get back even part of the previous loan with repayment period of one year.

The bank gave the additional loan without verifying the realtor's repayment capability. Now, the bank is left with defaulted loans of Tk 69.34 crore that include interest.

Of the Tk 65-crore loans, the realtor and its concern Advanced Ready-Mix Concrete Industries embezzled more than Tk 20 crore through fake documents, said the BB report.

The two firms opened LCs against B&F Industrial Park, the beneficiary company, to buy stone.

In reality, no product was purchased, and the two firms misappropriated the depositors' funds with the help of some officials at the Motijheel branch.

Talking to The Daily Star, SM Anwar Hossain, chairman of Advanced Development Technologies, admitted that he is a defaulter with the Farmers Bank.

“I started repaying the loans from January this year. I am making payments twice a week. The entire loan amount will be paid back in the shortest possible time.”

He claimed he had not diverted any funds to other sectors and did not commit any wrongdoing. “I did not embezzle any funds from the bank in the name of LC.”

He also said the bank sanctioned the Tk 45-crore loan a month after he had opened an account with its Motijheel branch.

Talking to The Daily Star, an official of the Farmers Bank said Anwar had repaid only Tk 56.50 lakh from January 1 to March 13 this year.

In June 2015, the Farmers Bank board sanctioned a loan of Tk 22 crore to Abeda Memorial Hospital before the Tongi-based healthcare institute even submitted an application, according to the BB probe report.

In a bid to legitimise the loan disbursement, the branch later prepared a credit proposal, mentioning a previous date on the document.

The entire loan to the hospital became defaulted, and the amount went up to nearly Tk 27 crore with interest till November last year.

The documents on the sanctioned loans carry signatures of both Alamgir and Mahabubul, according to the BB.

Ismail Hossain Sirajee, managing director of Abeda Memorial Hospital, told this newspaper that he failed to repay the credit instalments in due time as he was abroad for the last seven to eight months.

“I repaid Tk 89 lakh in different phases between January and March. I will make further payments by this month for having the defaulted loans rescheduled,” he said.

However, one of the Farmers Bank officials said Ismail had repaid Tk 74 lakh from January 1 to March 13 this year. 

The BB probe also unearthed that the private bank approved Tk 17 crore to Index Housing, flouting the banking rules.

Mahabubul, ex-chairman of the bank's executive committee, sanctioned the loan without even placing the loan proposal before the board. The bank's head office initially rejected the proposal, but Mahabubul approved the loan anyway.

He also used the executive committee's stamp on the documents to legitimise the credit disbursement, found the BB.

As of November last year, Index's defaulted loans with the bank stood at Tk 20.37 crore. However, the bank showed the amount to be unclassified.

Rejaul Kabir, manager of Index, claimed that the company was not a defaulter. Rather, it was the bank which was at fault.

He said Index had to go through financial hardship as the bank failed to disburse the funds in full.

Seeking anonymity, a Farmers Bank official said the housing company repaid only Tk 4.50 lakh from January 1 to March 13 this year.

Apart from these firms, Al-Faruque Bags, a concern of Bogra-based Al-Faruque Group, got loans of Tk 36 crore from the Motijheel branch in January, 2016, though it was a defaulter with another bank.

In August last year, the branch disbursed an additional Tk 14 crore to the firm despite its poor record of repayment.

Al-Faruque's total defaulted loans stood at Tk 47.19 crore as of March 13 this year.

This correspondent recently visited the firm's corporate office in the capital's Green Road area where one of its officials told him that the company was not manufacturing any bags.

“I joined the company two months ago but I have not found any of our factories producing bags,” said the official, seeking anonymity.

Asked, one of the Farmers Bank officials said that before approving the loan, the bank did not inspect the company's factories to verify whether it produces bags.

Flouting the banking rules, the Farmers Bank also gave loans of Tk 72.42 crore to Nahar Farmers Group, Tk 54.79 crore to Apollo Trade International, Tk 16.79 crore to Mollik Aquaculture Farm, Tk 25.50 crore to Messers Premjoy, Tk 10.95 crore to Mac Trading and Tk 22.82 crore to Bangladesh Development Company, according to the BB report.

The loans given to these companies have become defaulted, it said.

BB DIRECTIVE

In mid-January this year, the BB directed the Farmers Bank to conduct a functional audit on its Motijheel branch's credit accounts with outstanding amount of Tk 1 crore each and above.

The BB asked the bank to submit the audit report by February 28 but it failed to do so.

Farmers Bank Managing Director Md Ehsan Khasru told this newspaper that the bank employed Artisan Chartered Accountants in mid-January to conduct the functional audit.

On January 4, Ehsan was appointed to replace AKM Shameem, who was sacked by the BB on December 19 for failing to protect the depositors' interests.

Ehsan said steps will be taken in line with the recommendations of the chartered accountancy firm.

A number of defaulter clients, including Advanced Development, Abeda Hospital and Index, applied to the bank for having their defaulted loans rescheduled, he said.

Contacted, ex-Farmers Bank chairman Alamgir, also an Awami League lawmaker, said he had not sanctioned any loans, using his executive power.

“The board of directors of the Farmers Bank officially sanctioned all the loans. The defaulted loans of the bank were below 4 percent when I was the board chairman.”

Asked why the branch concealed data on the defaulted loans, Alamgir, also ex-home minister, said the information was incorrect as the branch had no scope to hide data on non-performing loans.

Despite repeated attempts, Mahabubul could not be reached for comments.

The two resigned from the bank board in November last year after the BB asked them to quit over their alleged involvement in loan scams.

Asked whether the BB would take any punitive measures against the persons involved in the scams, BB spokesperson Debashish Chakraborty declined to comment.