Lull in Sonali's lending
Sonali Bank is paying more interest than what it is earning as its lending activities have slumped following the Hall-Mark loan scam that rocked the industry five years ago.
The bank has only Tk 38,000 crore in outstanding loans against deposits of around Tk 100,000 crore, according to Obayed Ullah Al Masud, managing director of Sonali Bank.
The bank spent Tk 1,095 crore to pay interest to depositors in the first quarter of 2017 while it earned Tk 667 crore, meaning it incurred a net loss of Tk 427 crore from interest, according to Bangladesh Bank figures.
“We are paying more interest but earning less.”
The advance deposit ratio of the largest state bank in Bangladesh stood at 39 percent in March -- the lowest among all banks.
This means the bank can lend Tk 39 against a deposit of Tk 100. Banks are allowed to lend up to Tk 80 per Tk 100.
“Although Sonali Bank is a commercial lender it appears to be functioning as an investment bank. We are trying to make up for the interest loss by making investment,” Masud said.
The bank earned Tk 767 crore from its investments in the first quarter, according to data from the central bank.
“Our main function is to lend but we can't do so,” the Sonali Bank MD said, while blaming the lack of demand for credit and corruption by former staff members for the lull on the lending front. After the Hall-Mark scam came to light in 2012, the bank's credit growth plunged to the negative until 2015.
Between 2010 and 2012, Hall-Mark Group and five other companies borrowed Tk 3,547 crore from Sonali's Ruposhi Bangla branch using fake documents. The bank is yet to recover the embezzled funds five years on.
The reason for the negative loan growth is that Sonali's bankers are reluctant to disburse credit fearing further scam, said a high official of the central bank.
Loan disbursement turned positive in 2016 as economic activities returned to normalcy thanks to political stability. Moreover, the bank was under pressure from both the government and Bangladesh Bank to expand business, he added. “We are now putting in more efforts to find good borrowers to increase our lending,” said a senior official of Sonali Bank.
For instance, Noman Group, the first and only Bangladeshi textile and garment manufacturing company to cross the $1 billion mark in exports, has recently been offered loans by Sonali.
“It has a good repayment record,” the official said, adding that Sonali plans to lend Tk 1,100 crore to Noman Group under a syndicated arrangement with four other banks.
Sonali is the biggest lender in Bangladesh in terms of coverage. It has 1,210 branches, of which 333 were unprofitable as of March. Its total net loss stood at Tk 1,248 crore in March, up from Tk 818 crore in December last year.