Banks' directors seem to be good borrowers as their loan repayment records are far better than the other groups of borrowers.
As of September 30, directors of the 56 scheduled banks took loans worth Tk 88,790 crore from each other's banks, according to data from Bangladesh Bank.
The sum is almost a seventh of the total loans of Tk 635,987 crore disbursed by all banks.
Yet, their defaults were only 1.9 percent, which is way less than the industry average of 10.34 percent. Even the non-performing loans of the private banks are more than double the bank directors'.
“Bangladesh Bank's stringent rules have forced bank directors to repay their loans regularly,” said a senior official of the central bank.
If a director defaults, his or her directorship in the bank will be cancelled as per the Banking Companies Act, said the official explaining the magic behind the bank directors' good loan repayment records.
For instance, last year, two directors of two private banks were removed from the boards for defaulting on their loans.
There are about 700 directors in 57 banks, including the newly launched Simanta Bank that is owned by the Border Guard of Bangladesh.
Of them, 100 are in the eight state-owned banks. There are no local directors on the boards of nine foreign banks operating here.
Of the remaining 39 private banks, two -- Trust Bank and Simanta Bank -- are owned by the Army Welfare Trust and BGB respectively, so their boards are composed of armed forces for the most part.
The board of directors of Islami Bank Bangladesh consists of foreigners and local professionals who are not necessarily businessmen.
So the loans taken by directors who are mostly businessmen would be from 36 banks.
But not all directors of 36 banks were big borrowers, according to the BB.
“Most of these loans are concentrated to 100 to 150 bank directors,” said another official of the BB.
For example, Salman F Rahman's Beximco Group has loans worth over Tk 7,156 crore with different banks. Rahman is a director and currently the chairman of IFIC Bank.
Similarly, Sikder Group, which has a good stake in National Bank, has loans of about Tk 2,000 crore with different banks.
Both companies took advantage of the large loan restructuring facility offered by the BB last year.
S Alam Group, which has stakes in at least four banks, has several thousand crores of loans with a dozen banks.
A director cannot take out loans worth more than 50 percent of his/her stake in the bank, according to the law. So they take loans from other banks through mutual understanding.
As of September this year, Islami Bank Bangladesh disbursed loans to directors of other banks worth over Tk 7,434 crore -- the highest by any bank.
National Bank and EXIM gave loans worth over Tk 5,039 crore and Tk 4,569 crore respectively to directors of other banks.