The central bank has instructed Rupali Bank to deposit Tk 284 crore in a blocked account as penalty for failing to arrest its high loan growth last year despite repeated warnings.
Rupali's year-on-year loan growth on December 31, 2013 stood at 13.98 percent, way above the 10 percent ceiling set by Bangladesh Bank in an agreement with the bank in September last year.
The central bank even cautioned Rupali several times during the course of the year about its high loan growth, as it would most definitely take its net loan growth for 2013 past the limit agreed, said a high BB official.
Subsequently on March 10, as penalty it directed Rupali to deposit the amount it lent past the ceiling to a blocked account. The figure comes to Tk 284 crore.
Rupali will neither be able to invest the sum anywhere nor receive any interest against it.
Rupali, however, has appealed for exemption from the punitive action. It said its cost of fund is 9.04 percent, meaning the penalty would yield losses of Tk 25.7 crore a year, which it would not be able to recoup either given the cap on loan growth.
Moreover, forced loans of Tk 708 crore were created last year, deduction of which from the calculations would take 2013's loan growth to 8.74 percent, the bank said in the appeal.
M Farid Uddin, Rupali's managing director, is hopeful that the central bank will consider the appeal.
He said the bank was on its way to meeting its initial loan growth agreement with the BB, which was 15 percent. And then in September last year, the ceiling was lowered to 10 percent, which put Rupali in a sticky situation.
The bank still promptly instructed its branches to stop giving out fresh loans, but in the end it was not enough.
Had the forced loans were not created due to political instability, the ceiling could have been maintained, Farid Uddin added.
The penalty on Rupali comes on the heels of the Tk 10 crore fine slapped on BASIC Bank for breaching its similar loan growth agreement. BASIC's loan growth stood at 25.26 percent, way over its ceiling of 10 percent.
However, the other three banks on which BB put a loan growth ceiling managed to stick to it. In fact, Sonali, Agrani and Janata's year-on-year loan growth at the end of December dropped between 7 to 12 percent.
But Farid Uddin said the three state-owned banks received around Tk 5,900 crore from the government against loans given to the Bangladesh Petroleum Corporation, due to which their loan growth dropped.
BPC also owes Tk 500 crore to Rupali, but it is yet to receive anything from the government, he added.