Orion Pharma Ltd, a pharmaceutical company of Orion Group, has been provided a rescheduling facility on a forced/demand loan by state-run Agrani Bank with special approval from the Bangladesh Bank.

Generally, whenever a borrower fails to make a payment for a letter of credit within the stipulated period, the amount turns into a forced or demand loan as the bank concerned has to meet the obligation to foreign lenders.

As per a memorandum of understanding (MoU) signed between Bangladesh Bank and Agrani Bank in 2023, the rescheduling of any forced or demand loan with a repayment period extension of two years and above will necessitate collateral of 100 percent of the loan.

The MoU is aimed at mitigating risks in loan recovery and preventing the creation of risky assets, said central bank officials.

However, Agrani Bank rescheduled Orion Pharma's forced loan of Tk 132.18 crore, out of its total outstanding liabilities of Tk 1,039.45 crore, with a repayment period extension of six years, even though the company had a collateral shortfall of around Tk 547 crore, showed central bank documents.

Bangladesh Bank sent a letter to Agrani Bank in May saying that the MoU's condition would not apply to Orion Pharma for the sake of public health as it was a company manufacturing, marketing and exporting medicine.

The banking regulator, however, imposed two conditions on Agrani Bank.

One was that Orion Pharma would have to meet the Tk 547 crore collateral shortfall by March 31 of 2025 and the other is that the central bank would have to be updated every three months on the status of the collateral's collection.

Contacted, Md Mezbaul Haque, executive director and spokesperson of Bangladesh Bank, said the central bank provides special approval to enable exemptions from rules and regulations from time to time based on recommendations from the finance ministry.

It depends on the subject or situation being considered, such as whether it involves matters concerning the power or pharmaceutical sector, he said.

The central bank conducted an inspection at Agrani Bank in May and found that the creation of the Tk 132.18 crore demand loan had caused Orion Pharma's total outstanding liabilities to exceed the single borrower exposure limit for banks set by the Bank Company Act.

As per the law, a bank is not allowed to lend more than 25 percent of its paid-up capital to a single client.

The Bangladesh Bank had earlier directed Agrani Bank to reduce the total outstanding liabilities of Orion Pharma to within the single borrower exposure limit by December this year.

However, the inspection team found that the company's loans had increased during the first five months of this year.

The inspection report said the central bank signs memorandums of understanding with state-run banks every year to improve their financial health.

It added that the conditions set in those documents apply equally to all customers of the banks.

It is not logical to exempt select clients from the MoU conditions, it added.

Contacted, Murshedul Kabir, managing director and CEO of Agrani Bank, told The Daily Star that Agrani Bank provided the loan rescheduling facility with approval from Bangladesh Bank.

Moreover, Orion Pharma's loan has been rescheduled following an adequate down payment, he added.

"We are not at fault for providing the facility," he said.

Central bank documents showed that Agrani Bank sanctioned Tk 963 crore for Orion Pharma to import machinery. A portion of it later turned into a forced loan.

Until April of this year, Orion Pharma's total outstanding liabilities at Agrani Bank stood at Tk 1,039.45 crore, as per the central bank document.

Contacted, Salman Obaidul Karim, managing director of Orion Group, told The Daily Star that Agrani Bank has rescheduled the loan as per rules, regulations and permission of Bangladesh Bank.

The collateral provided earlier did not include assets of Orion Pharma Park, the company's manufacturing facility in Narayanganj which was undergoing expansion at that time, he said.

"The expansion is now complete and Orion Pharma Park has initiated manufacturing processes," he said.

The bank will be provided documents very soon presenting Orion Pharma Park's assets as collateral and it will be enough to cover the loan, he explained.