Banks look for ways to rescue debt-ridden Mostafa Group

Banks are trying to find a way to rescue Mostafa Group, a Chittagong-based conglomerate now overwhelmed by piling bank loans.
However, bankers said it must be a 'win-win game' for both the parties, otherwise banks will be in trouble and their profits will be affected in meeting the loan-loss provision.
“We have discussed the issue of Mostafa Group at a recent meeting. We are working on how we can help them get rehabilitated,” said Anis A Khan, vice-chairman of Association of Bankers, Bangladesh and managing director of Mutual Trust Bank. “Debt syndication could be a solution,” Khan said.
Mostafa Group, a 62-year-old company, grabbed the spotlight after banks found it difficult to recover loans from the conglomerate, which owes around Tk 1,400 crore to nearly 30 banks and non-bank financial institutions. All these loans have been defaulted.
Some of the banks alleged that Mostafa Group bought huge lands by diverting funds from bank loans.
“Funding Mostafa Group in its present condition is too risky…we can't do it in any circumstances,” said Helal Ahmed Chowdhury, managing director of Pubali Bank to which the Group owes around Tk 100 crore.
“We have advised them to sell some lands to make down payments before applying for fresh loans,” he said.
Chowdhury also said rescheduling its loans would be tough after June when the central bank will discontinue the relaxation of loan rescheduling rules and the defaulters will have to pay 50 percent of their outstanding loans to make their loans regular.
Shafiqul Alam, managing director of Jamuna Bank, said they have no problem if all banks rescue Mostafa Group together.
“We are not concerned about our loans to Mostafa Group as the amount is only Tk 5 crore,” Alam said.
The Daily Star called Hefazatur Rahman, chairman of Mostafa Group, for his comments. He neither picked the phone nor replied to text messages.
The late Mostafizur Rahman of Chittagong founded Mostafa Group in 1952. Initially it was engaged in commercial trading and export and import. Later, it started manufacturing steel products, iron and MS rod and got involved in shipbreaking, artificial leather making, and shrimp cultivation, processing and export.

The Group also has business in textile and readymade garments, paper, refined palm and soybean oil, coconut oil, iodised salt, tea, rubber plantation, transport, IT and the financial sector.
Meanwhile, Bangladesh Bank has found that some big corporate borrowers based in Chittagong are increasingly missing payments on loans they took in the last several years, a trend that could deal a blow to the country's banking industry.
Banks' non-performing loans rose to more than Tk 10,000 crore for the Chittagong zone at the end of December 2013, from Tk 7,678 crore a year ago, mainly because of non-payments of loans by some big borrowers, according to the BB.
Many of these borrowers want fresh loans without making any down payments and paying previous interest, which the bankers said is not possible.