A branch manager of Janata Bank has the authority to approve a loan of Tk50 lakh at most for a single client, as per the bank’s rule. But one manager – a mid-level officer of the bank – approved Tk8.40 crore to one client in a single day.
This, however, is not an isolated incident. The manager had been approving loans beyond the authorised limit for a long time.
But he did way more than just violate the ceiling; all the loans given from the branch in the form of packing credits were against fake export orders and without any verification of their export capacities.
This is how 87 exporters swindled Tk920 crore in loans from Janata Bank’s local office branch in Motijheel, between 2017 and 2018.
Many of these loans were disbursed even before approval.
This fresh loan scandal came to light when Bangladesh Bank revealed it in a special inspection, conducted in June this year.
Packing credit – a loan provided to exporters or sellers to finance the procurement of goods before shipment – involves the bank making funds available to a letter of credit issued to the seller and a confirmed order for selling goods or services.
In case of the Janata Bank office in question, the export orders against which the loans were given were found fake as nothing had been exported at all.
The foreign buyers, too, were non-existent. Janata Bank provided the loans without taking their credit reports, which is mandatory as per the bank’s rules.
Of the 87 clients who were given packing credits, 25 were vegetable exporters and the rest were in the leather and ready-made garment business. Out of the total packing credits amounting to Tk919.59 crore, issued till December last year, Tk310 crore had already been defaulted.
After stumbling upon the scam, Bangladesh Bank asked the managing director of Janata Bank, Md Abdus Salam Azad, to take punitive action against the branch officers involved in the scandal.
When contacted, Azad declined to comment on the matter.
These fraudulent practices are reminiscent of another loan scandal involving the same bank, when leather exporter Crescent received Tk765 crore against fake export bills between January 2017 and February 2018.
Janata Bank has not recovered that money yet.
Not approved, yet disbursed
On July 16 and July 27 last year, the branch manager was given notes on loan proposals against Exim Footwear for approval.
Instead of approving the loan, the branch manager instructed recovering of overdue loans of Tk5.68 crore from the client. However, the respective officers still decided to go ahead and disburse the loan to the client.
Similarly, in the case of Angan Leather Complex, the branch officer disbursed two loans amounting to Tk80 lakh on April 12 and Tk40 lakh on April 19 last year, prior to approval.
They also disbursed loans of Tk40 lakh on May 28 and Tk35 lakh on April 16 to Salma Leather, last year, before approval.
“In this case, the branch manager seemingly tried to avoid his responsibility by only recommending to recover the overdue loans and instead of monitoring disbursement, he gave the opportunity to continue irregularities,” the Bangladesh Bank report mentioned.
Falsified export documents
In March last year, exporter Angan Leather submitted an export contract to the bank, mentioning the Chinese company Eternity Action Ltd as the foreign buyer.
But the contract paper contained no logo or address of the buyer. There was also no bank information of either the buyer or the seller. The destination of the export was mentioned as Hong Kong Sea Port – a fictitious port.
Another export contract of the same client included the name and address of a Chinese buyer, YI NENG DA Leather Ltd.
The buyer’s pad read: “We confirm having sold the following merchandise to the undermentioned buyer.” But no bank name had been mentioned.
Moreover, the reference of both the contract numbers was the same, against which Janata Bank approved packing credits of Tk40 lakh per contract.
The bank also approved Tk40 lakh against a purchasing order of SA Leather from a Chinese buyer named Royal Leather International Co Ltd in May last year.
The central bank inspection found that there was neither the name of a buyer or a seller mentioned in the order, nor an export destination. Similar discrepancies were found in three more purchasing orders, which were submitted in April and June last year.
Again, the bank approved Tk40 lakh against each purchasing order.
Silva Trade International also received Tk40 lakh against four contracts, each in the name of the same buyer – Royal Leather International Co Ltd.
All the export contracts seemed unscrupulous, the central bank observed.
No verification of export contracts
One branch officer’s seal was found on most of the contract papers with the comment “contract verified”. He also signed them without a date.
When the central bank inspection team contacted the officer, he said he had no idea about those contracts.
He claimed that he had signed those contracts as “verified” following the instruction of the official in charge of packing credits. This means that the note for packing credits was presented to senior officials without verifying contract papers, despite which the respective assistant general manager, deputy general manager and general manager approved the loans.
Janata Bank does not possess any information on whether anything was really exported against the export orders.
The owners or directors of the export firms are also required to give their personal guarantees against these documents, but no such guarantees were found.
The bank also approved packing credits against 25 vegetable exporters, in violation of its regulations.
Despite not qualifying to get any loans, Janata Bank lent Tk44 lakh to Al-Adib International, Tk10 crore to Al-Harun Enterprise, and Tk17 crore to Al-Madina General Trading.
No information about the firm Harun Enterprise could be found in the bank’s documents.
Janata Bank also approved additional loans worth Tk71 crore, Tk10 crore, and Tk11 crore against Al-Madina Footwear, Al-Madina Leather Complex, and NR International, respectively, without verifying any of their export capacities.
Furthermore, loans were also provided without taking CIB (Credit Information Bureau) reports against clients Salma Leather, who was lent Tk14 crore; Supreme Tannery, who was lent Tk9 crore; and SA Leather, who was lent Tk3 crore.
No credit reports on foreign buyers collected
Banks are required to collect credit reports on foreign buyers before providing packing credits and the reports have to be satisfactory before sanctioning a loan.
However, Janata Bank did not collect credit reports on any of the foreign buyers before sanctioning loans against any of its 87 borrowers.
When the Bangladesh Bank inspection team sought the CIB reports on these foreign importers, that local Janata Bank office at Motijheel replied that the reports would be collected following the central bank’s advice.
This response suggests that no CIB reports on the foreign buyers were collected by the branch, the inspection report concluded.