Administrator barred from taking charge of Dhaka Mercantile Cooperative

The government appointed an executive officer for the controversial Dhaka Mercantile Cooperative Bank Ltd last month but the cooperative officials did not let him join office citing a stay order from the High Court.

The appointment was made after the Department of Cooperatives and Bangladesh Bank detected gross irregularities in the cooperative.

“We will continue our legal fight against the cooperative,” said Mofizul Islam, registrar and director general of the Department of Cooperatives that regulates the country's cooperative firms.

The Rural Development and Cooperatives Division issued an order in the first week of July asking the department to appoint an executive officer (administrator) in the errant cooperative with immediate effect.

Accordingly, the Department of Cooperatives appointed its joint registrar Md Nuruzzaman to join Dhaka Mercantile Cooperative.

“I went to the office of Dhaka Mercantile Cooperative on July 14 but the firm declined to accept my joining letter showing a stay order of the High Court,” said Nuruzzaman.

The cooperatives regulator has taken the issue seriously and is trying its best to vacate the stay order as soon as possible.

“We have informed the ministry and the attorney general about the updates on the matter,” said Nuruzzaman.

In April this year, the central bank warned people not to do banking activities with the cooperative as it has no proper licence.

The BB in a statement alleged that Dhaka Mercantile Cooperative has been running banking activities such as taking deposits and giving loans by illegally using the word 'bank' in its name.

The cooperative has collected deposits of Tk 981 crore and disbursed loans worth Tk 1,079 crore as of December 31 last year, according to a BB inspection report.

The firm attracts depositors by offering hefty returns, the central bank said. In 2015 and 2014 it gave 50 percent and 40 percent cash dividends respectively, but questions arose over who the beneficiaries of the dividends were, said an official of the Department of Cooperatives. 

Dhaka Mercantile Cooperative has 116 branches and employs about 2,500 people across the country, according to its website. The website also says it is a specialised development cooperative financial institution, offering retail and commercial banking under a cooperative theme. It provides collateral-free credit to businesses.

The cooperative's Chairman Abu Zafar Chowdhury and Managing Director Shamsun Nahar could not be reached for comments despite several phone calls. In March 2012, a central bank probe found that controversial Destiny Group's cooperative arm engaged in illegal banking.

Destiny Multipurpose Cooperative Society, which became the cash cow for Destiny Group soon after its inception in 2005, saw an astronomical rise in its capital, shareholders, profit and investment since 2009.

Top Destiny Group officials, including its managing director Rafiqul Amin, are currently behind bars and facing charges that include money laundering and transferring company funds to personal accounts.