Conflicts among directors and alleged dominance of the chairman over the management have put NRB Bank Ltd in trouble, leaving it without the managing director for more than a month.
The fourth generation private bank has already been in the red with bad loans mounting and 'questionable' activities of the chairman have deteriorated the corporate governance and pushed the bank's financial health into grave risk, a group of sponsor directors said in a complaint to the central bank.
Mohammed Mahtabur Rahman who has been the chairman of the bank since 2016 allegedly seized all power of management and executive committee of the bank sending its managing director into forced leave on August 3 this year.
"The chairman has intentionally created some false allegations against the Managing Director, Mr Mehmood Hussain, and sent him on a forced leave for three months," reads the six-page complaint signed by seven sponsor directors.
The board chairman has taken over loan sanctioning and all other managerial power, making the management dysfunctional.
"Ever since the tenure of the present Chairman, Mahtabur Rahman, supported by a few other members of the Board has been carrying out activities which are highly questionable and irregular both in legal and moral terms and this is seriously affecting the bank's goodwill, its customers and its shareholders," says the August 17 complaint addressed to the Bangladesh bank governor.
The Executive Committee and risk management committee of the bank which plays the most vital role in business decisions of a bank has remained inactive since February as the power of the committee was seized.
M Badiuzzaman, director of the bank is also the chairman of the executive committee.
In the recent note of dissent to the Bangladesh Bank, the seven NRB Bank directors also alleged that the chairman is trying to tighten his family's grip on the bank by buying shares in the name of his family members and that he is involved with various irregularities, such as mishandling CSR fund, and personal use of company properties and staff members.
The seven directors also made complaints against a few other directors.
The seven directors are – founder chairman of the bank Iqbal Ahmed, M Badiuzzaman, Nesar Ahmed Chowdhury, Kamal Ahmed, Naveed Rashid Khan, Mohd Idrish Farazy and Aminur Rashid Khan.
When contacted, Md Mehmood Husain, managing director of NRB Bank, said he was suddenly informed about the forced leave for three months with the excuse of a detailed investigation into some loan irregularities.
He demanded that the Bangladesh Bank should look into this matter.
"The operation of the bank has almost collapsed as the management has been kept dysfunctional since March amid the coronavirus outbreak.
"Every purchase issue or loan processing or other managerial activity needed to be placed before the board, delaying the daily operational activities. As a result, loan disbursement even under the stimulus packages has been hampered," he said.
When contacted, Abu Farah Md Naser, executive director of the Bangladesh Bank, confirmed that they received the note of dissent sent by the seven directors of NRB Bank.
"It appears that the directors of the bank are in conflict. The Bangladesh Bank is looking into it," he said.
When asked if a bank can send its managing director on forced leave for three months, he said the decision goes against Bangladesh Bank rules in technical terms since a bank cannot run without a managing director for three months.
Mohammed Mahtabur Rahman could not be reached for comment on this issue as he is now staying abroad.
Contacted, Mahtabur Rahman's personal secretary Hasanur Rahman Rony on Saturday said he would convey the message to Mahtabur and give his version over the issue to The Business Standard. However, he did not send any reply from Mahtabur Rahman until the submission of this report last night.
"Irregularities" committed by Mahtabur Rahman
The seven directors in their letter to the Bangladesh Bank alleged, it appears that the bank has become a family business of Mahtabur Rahman.
They said Mahtabur, also the chairman and managing director of Al Haramain Perfumes Group of Companies, uses the head office of NRB Bank as the office of his perfume company to operate business in the country, as Al Haramain does not have any separate office in Dhaka.
Besides, he uses the vehicles of the bank for his personal as well as family use, the directors alleged. Mahtabur allegedly used the bank's vehicles and the service of its staff members for the wedding ceremony of his daughter recently.
The directors also raised allegations of mishandling the bank's corporate social responsibility fund of Tk2 crore this year.
The allegation says although it is obligatory to invite tenders for any expense worth Tk1 crore or more by a bank, Mahtabur Rahman in collusion with his brother Oliur Rahman have spent the CSR fund in the name of distributing food among the poor, they wrote, adding that he has not submitted any account regarding this expenditure to the board.
In their note of dissent to the central bank, the seven NRB Bank directors put forward three recommendations to the central bank. The recommendations are – restructuring the bank's board, conducting a detailed investigation into the bank, and appointing an observer to the bank.
Inside the bank
Mohammed Mahtabur Rahman has been holding the chairmanship of the bank since 2016, creating tension among other directors of the bank. He has imposed family rule on the board of directors and the managing authorities of the bank, the seven directors said in their letter.
"The bank is now hostage to Mahtabur Rahman himself and his family members. In this case, a corrupt clique among the directors of the bank is working as his collaborators," they wrote.
He has allegedly been purchasing shares of other directors since he took over the chairman post. Other directors have been leaving their directorship in the bank for the last several years. Mahtabur Rahman bought shares from 11 directors of the bank in the last four years.
As the Bangladesh Bank's rules allow a director to hold a maximum of 10% stake, Mahtab has allegedly bought shares of the bank in the name of his family members. Currently, he along with seven other members of his family holds 20% stake in the bank, according to sources at the bank.
Deterioration in bank's health
The bank incurred a loss of Tk12.5 core last year, although it had made a profit of Tk58 crore in the previous year.
The volume of non-performing loans of the bank has been on the rise since 2016.
Explaining the reason for the loss, Mehmood Husain, who joined the bank in August 2016 as the managing director, said it is due to high provisioning required for high default loans.
He said the bank could not do business due to an adverse situation in the financial market including liquidity crisis, tightening of ADR (Advance Deposit Ratio) by the central bank and slow business activities in the country.
However, the deposit growth of the bank was good and loan disbursement also increased. But, some loans turned into bad loans which eroded profit of the bank, he said.
The deposit of the bank stood at Tk4,181 crore at the end of December last year, while it was Tk1,746 crore in 2016, according to the bank statement.
The non-performing loans climbed to 4.14% of the bank's total outstanding loans as of December last year, which was 1.9% in 2016.
However, it came down to 3.73% in June this year, Bangladesh Bank data show.