Islami Bank Bangladesh disbursed loans amounting to Tk 315 crore to Unilliance Textiles violating rules, jeopardising the interests of depositors and shareholders, said a central bank report.
Both the present and past management of IBBL have been extending undue benefits to the home textile manufacturer for the past nine years through its Gulshan branch.
A major portion of the disbursed credit had become defaults but the bank went on showing the loans as unclassified to continue with its loan disbursement to the company, according to a Bangladesh Bank investigation in May.
IBBL adopted the 'rescheduling trick' to extend special financing facilities to the client: soon after the loans are rescheduled fresh credit is extended to the company.
Between 2015 and 2017, it rescheduled Tk 200 crore in three phases including grace periods to save Unilliance from sliding into the defaulting zone.
Besides, the bank frequently violated the credit limit set by its board. But the board too was complicit: it would normalise the transgression by raising the credit limit later.
For instance, in March 2009 the IBBL board had sanctioned Tk 40 crore as the credit limit for the company, which was raised several times to stand at Tk 315 crore as of May.
All the while, the bank did not recover a penny from Unilliance -- although it had several openings to do so.
For instance, Unilliance was allowed to transfer its export earnings amounting to Tk 211 crore to the Uttara branch of Dutch-Bangla Bank from the Gulshan branch of IBBL.
“IBBL should have adjusted its credit and not let the company transfer funds to another bank,” the BB report said.
The BB wrote to the IBBL in June informing its investigation findings and called for punitive measures against the officials concerned. But the bank refuted all the misdemeanours mentioned in the report.
The central bank sent another letter to the bank in August instructing it not to give further rescheduling facility to Unilliance and recover the overdue amount by December.
If it fails to recover the due by the deadline, the loans must be classified.
But on October 30, in a direct defiance to the central bank's directive IBBL rescheduled another Tk 61 crore of Unilliance and gave the company five years to repay the sum.
“The Banking Regulation and Policy Department of the central bank gave the approval to IBBL to reschedule the loans,” a BB official told The Daily Star wishing not to be named.
Contacted, Shah S Alam, managing director of Unilliance, told The Daily Star that IBBL had rescheduled the loans by taking prior approval from the central bank.
Alam, who is also a senior vice-president of the Bangladesh Terry Towel and Linen Manufacturers and Exporters Association, went on to allege that the bank was not adequately cooperative.
IBBL tended not to release funds on time, due to which he had to face problems.
Asked why his company took loans by resorting to unethical ways, Alam said: “The Bangladesh Bank inspection was unnecessary. I do not have any illegal money. I run my business following all rules properly.”
Unilliance manufactures home textile products at its plant spanning 16 acres in Sreepur of Gazipur. Its turnover in 2016 stood at $32 million, up 6.67 percent from a year earlier, according to the company's website.
Contacted, Arastoo Khan, chairman of IBBL, said the bank had financed Unilliance by maintaining all rules and regulations.
“There is no problem with this client,” he said, while referring the correspondent to Muhammad Qaisar Ali, head of IBBL's Corporate Investment Division-1.
Ali said IBBL had already started the process to take punitive measures against the officials concerned as per the BB directive.
“The involved officials' names have been passed on to the Human Resources Department.”
Ali said Unilliance is now paying instalments on a regular basis after rescheduling the loans.