High Amount of Classified Loans in Sonali Bank

Muhith blames it on govt interference

Finance minister AMA Muhith
Finance Minister AMA Muhith. Star file photo

The amount of classified loans at the Sonali Bank is very high, and one of the key reasons behind this is government interference, Finance Minister AMA Muhith said yesterday.

The government interferes in all the six state-run banks, but it is more so in case of the Sonali Bank, he added.

“But the government is trying to reduce the interference…. We have decided that from now on, if you [state banks] deem a project unfit for investment, we will try to stop interferingin the matter,” he told Sonali Bank's annual conference at the Institution of Diploma Engineers, Bangladesh, in the capital.

As of September last year, Sonali Bank's total classified loan stands at Tk 11,964 crore, which is 36 percent of its total loan, according to central bank data.

Speaking at the programme, bank Managing Director Obayed Ullah Al Masudsaid the bank had to shell out from its coffers Tk 200 crore every year to provide various services to the government without any charge.

Since 2007, when the bank began its journey as a company, it adjusted Tk 5,917 crore in accumulated losses (out of Tk 6,574cr). But it still has a capital shortfall of Tk 5,693 crore, he added.

In the last eight years, the government pumped Tk 3,000 croreinto the bank in bailout money.

The bank has sought another Tk 6,000 crore from the government.

On behalf of the government, the bankrepays the public for the savings certificates, for which the bank has to set aside Tk 4,000 crore for these services, said the MD.

Although the government reimburses the money, sometimes it takes a long time, he added.

Sonali Bank also lends money to state agencies such as Bangladesh Petroleum Corporation and Bangladesh Jute Mills Association. The government repays the sum through bonds at 5 to 7 percent interest rate with a maturity period of 20 to 30 years.

This results in a loss of Tk 1,000 crore a year, said Masud.

Both the bank chairman and the MD also claimed that the science and technology ministry was not paying them Tk 5,000 crore in commission against the Tk 94,000-crore letter of credit (LC) it opened with a Russian Bank.

The LC, opened in November last year, involves purchase of equipment for the Rooppur Nuclear Power Plant project.

“The finance division and the bank and financial institutions division should kindly intervene and resolve the matter,” said Moqbul, the chairman.

However, ministry and project officials termed the demand for such a high amount of commission ridiculous.

Md Shawkat Akbar, the project director, told The Daily Star last night that they recently sat with officials of Sonali and Bangladesh Bank to discuss the commission issue.

The January 23 meeting discussedpaying Sonali Bank Tk 20 crore in commission -- Tk 10 crore in near future and the rest at the later phase of the project, he added.

However, the amount has not been finalised and negotiations are still underway, said Anwar Hossain, science and technology secretary.

At the programme, the bank chairman said the bank provided 37 services to the public for free and 14 services at a low cost.

“The government should pay some fees for the services,” said Moqbul.

In response, Muhith said, “Sonali bank has made three proposals. I am not making any decision at the moment, but I am considering them with due importance.”