10 Counts of Irregularities: NRBC Bank high-ups asked to show cause

Bangladesh Bank has served show-cause notices on the chairman and the managing director of the NRB Commercial Bank over 10 counts of grave irregularities at the four-year-old financial institution.

In a letter sent to Managing Director Dewan Mujibur Rahman on March 20, the central bank asked him to reply within 10 days why he should not be removed from the post.

In another letter issued to NRBC Bank Chairman Farasath Ali the same day, the BB asked him why appropriate action in line with the Bank Company Act should not be taken against the bank for the irregularities.

“It seems the board of directors failed to uphold the Bank Company Act to protect the interest of the depositors and the public,” it read.

The Daily Star has obtained copies of both the letters.

Contacted, the MD and the chairman declined to make any comments, saying the matter is under trial in court.

Talking to this correspondent, BB Deputy Governor SK Sur Chowdhury said that if the central bank finds their replies unsatisfactory, it would take legal action against the NRBC Bank.

Citing articles from the Bank Company Act, the letter to Rahman said he failed to discharge his responsibilities properly.

All the irregularities were interrelated and took place with the involvement of the board and the management. As the MD, Rahman never informed the BB about the irregularities, said the central bank.

One of the irregularities involved forging of the signatures of four absent NRBC Bank directors -- Kamrun Nahar Sakhi, ABM Abdul Mannan, Feroz Haider Khan and Md Amir Hossain -- for showing them present at the meetings of the board and the executive committee.

The forging of signatures of the directors, who were abroad at that time, amounts to fraud, and is punishable under law.

“As the managing director of the bank, you didn't inform Bangladesh Bank about such serious irregularities. Through this, your trustworthiness as the NRBC Bank managing director has been tarnished and the depositors' money is at risk,” said the letter sent to Rahman.

According to the letter sent to the chairman, the blame for this serious fraud and forgery falls on the bank's board of directors.

At the board meeting on August 24, 2014, alternative directors were appointed against 10 NRBC Bank directors, including Sakhi, Mannan, Feroz and Hossain.

In the letter to Rahman, the central bank said, “The Bangladesh Bank rules regarding the appointment of alternative directors were not followed here.” Besides, the requisite documents were not sent to the BB despite repeated directives.

Sakhi was appointed to the bank board, suppressing the information that she was a loan defaulter, said the BB.

It also mentioned that Mercantile Bank Chairman Shahidul Ahsan and officials of his company, Ahsan Group, participated in the meetings of the NRBC Bank board though they were not its directors.

Ahsan also enjoyed loan benefits from the bank. These activities run counter to the BB rules and its circulars, said the letters to the chairman and the MD.

The bank board approved a Tk 140-crore loan for AG Agro, a concern of Ahsan Group, on May 8, 2013 -- just four days after Ahsan submitted an application for the loan.

Since the collateral against the loan was only Tk 3.91 crore, the BB advised the bank to bring down the loan amount, which was disregarded by the board. Instead, it raised the loan amount to Tk 183 crore in May last year, putting the bank at risk.

AG Agro Director Shafiqul Islam and Adviser Golam Farouque are alternate directors of the NRBC Bank.

The NRBC Bank also gave a loan to Aziz Chowdhury and his sons Salauddin Chowdhury and Tarek Chowdhury for building a house. But the money was later transferred to AG Agro's account with the NRBC Bank.

Another loan was given to Stylish Garments owned by the Chowdhury family. That money was also transferred to the same AG Agro account.

Ahsan kept paying regular instalments for his loans with the NRBC Bank by getting more loans disbursed from the same bank under different names, said the central bank.

“In this regard, both the board and the MD are guilty.”

Besides, NRBC Bank's head office approved loans of Tk 19 crore against Begumganj Feed Mills, an associate company of Ahsan Group, without any loan application from the client and proposal from the branch concerned.

At a meeting on May 11 last year, the bank board raised the loan amount to Tk 118 crore without verifying the company's capacity to pay it back.

Following the disbursement of the loan, Ahsan's brother Shafiqul Ahsan was relieved from the post of Begumganj Feed's managing director in a bid to give the false impression that the company is not associated with Ahsan Group, the BB said.

Huge amounts of money were transacted between the loan accounts of Begumganj Feed and AG Agro, and both firms used the same address in their trade licences.

AG Agro is the ultimate beneficiary of the loans taken against Begumganj Feed, it said.

The loans the NRBC Bank gave to Begumganj Feed and AG Agro totalled Tk 301.35 crore, which was 56 percent of the bank's capital of Tk 540.43 crore as of June last year.

But the BB rules say no bank can sanction loans more than 35 percent of the bank's capital.

In the letters, the BB also mentioned several other loan-related irregularities.