Bangladesh Bank has asked National Bank not to disburse any loan without its prior approval.
The banking watchdog recently received allegations that the lender had disbursed a good amount of funds sidestepping approval from its board.
This prompted the central bank to issue the instruction on April 5 asking the bank to send by yesterday detailed information of loans approved and disbursed since December 26.
But the bank yesterday sought five working days to send the information, saying it was not possible to provide data within only one day, said ASM Bulbul, acting managing director (MD) of the lender.
He claimed that they had not disbursed any large loan, which requires approval from the board, in recent months.
If no board meeting is held, the bank has to take the permission from the central bank.
The central bank has also asked National Bank to inform whether Bulbul was working under a valid contract.
Bulbul was an additional MD before serving the lender as acting MD.
He acknowledged that his employment tenure ended on March 31 but that the bank's authority had earlier extended it by one month.
But the board of directors is yet to approve the extension, he said.
The board will give the approval in the quickest possible time, Bulbul said.
The central bank asked the bank not to allow Bulbul to get involved in regular banking activities if he had not been reappointed.
But yesterday Monowara Sikder, chairman of the bank, issued Bulbul a reappointment letter enabling a one month extension.
National Bank has done it in a hurried manner to legalise Bulbul's activities since his contract's expiry, which will also help it to respond to the central bank letter, said a BB official.
The lender has been also asked to provide all documents of any board meeting held since December 26.
The bank's board was restructured after its chairman, Zainul Haque Sikder, passed away on February 10.
Zainul's spouse Monowara Sikder was elected chairman of the board on February 24 but no board meeting has been held since that day.
Despite that, the bank has allegedly disbursed loans breaching the rule, said a central bank official.
Bulbul claimed that branches of the bank now disbursed small-scale loans which do not required prior approval of the board.
The central bank also instructed the bank to send detailed information of loans given out to four companies – Rongdhanu Builders, Desh TV, Rupayan and Shanta Enterprise.
Bulbul claimed that the lender had earlier disbursed loans for Desh TV and Rupayan but did not have any plan to give out loans to the remaining two.
Md Serajul Islam, spokesperson and an executive director of the central bank, said the BB would take measures after verifying documents sent by the lender.
The financial health of the first generation bank started worsening since 2009 when Sikder Group commenced to take control of the board of the lender.
The central bank earlier discovered a number of irregularities taking place during the sanctioning and disbursing of loans by National Bank.
The bank had also disbursed a large amount of loans among directors of other banks.
A good number of banks have been giving out such loans under mutual understanding among directors, which has created concern over corporate governance in the banking sector.
The bank gave out Tk 7,216 crore to directors of other banks, or 18 per cent of its total outstanding loans as of December last year, showed data from the central bank.
Defaulted loans in the bank stood at Tk 2,085 crore as of December last year in contrast to Tk 388 crore in 2009.
Non-performing loans in the bank would have been much higher than the existing amount had the lender not written off Tk 2,154 crore last year.
The bank also faced a provision shortfall of Tk 435 crore last year due to its weak financial health.
In addition, 40 of its 214 branches are incurring losses.
Six banks in the country's banking sector now have 40 or more loss-incurring branches.