Photo : Messenger
The financial stability of the state-owned Janata Bank has been steadily declining due to substantial disbursements of funds to individuals and entities without adequate scrutiny over recent years.
The lack of due diligence has significantly weakened the bank's financial standing, with a staggering 77 percent of its loans concentrated in just five branches. This concentration, coupled with a concerning increase in non-performing loans (NPLs), poses a significant financial risk to the institution.
The branches primarily responsible for this concentration include the Local Office Branch, Janata Bhavan Corporate Branch, Motijheel Corporate Branch, Dilkusha Corporate Branch, and Chattogram General Bima Bhabhan Corporate Branch. Out of the bank's total of 923 branches, the bulk of loans, amounting to Tk 72,000 crores, are confined within these select branches, which is cause for concern given the bank's total debt of Tk 93,371 crores as of June.
An official from the bank expressed concerns to The Daily Messenger, highlighting the challenges faced by bank officials in collecting defaulted loans from these concentrated branches. To alleviate this risk, there's a pressing need to diversify both the geographical areas and the customer base for loan distribution.
Over the past year, Janata Bank's defaulted loans have surged significantly. As of September, the bank's non-performing loans reached Tk 28,541 crore, constituting 32.6 percent of their total loans, a substantial increase from 24.91 percent a year earlier.
Bangladesh Bank had previously imposed restrictions on loan disbursements to the top five branches of Janata Bank in 2021, as these branches were responsible for disbursing three-fourths of the bank's total loans. At that time, 72 percent of the disbursed loans were concentrated in these branches, warranting regulatory intervention.
Overall, the country's banking sector is grappling with a substantial amount of defaulted loans, standing at Tk 1, 55,397 crores as of September, marking a 15.63 percent increase from the previous year. The failure of Bangladesh Bank to meet the financial performance and efficiency targets set for Janata Bank in the first half of the year remains a cause for significant concern.
Despite being the bank with the second-highest deposits and loans among the 61 listed or scheduled banks in the country, Janata Bank's current financial predicament demands immediate attention and strategic interventions to mitigate risks and ensure long-term stability.
Economist Dr. Ahsan H. Mansoor commented that if such a bank gets into trouble, it will have a bad effect on the entire banking sector. He told The Daily Messenger, “Janata Bank was once in a very good position among the state-owned banks. But like other banks, it went into a bad state in the last 10 to 12 years. Bangladesh Bank should have paid special attention to saving this bank. Lately, the central bank has increased activity in the bank, which is a good thing.”
According to Janata Bank sources, since 2007, Bangladesh Bank has been setting biennial targets for improving the financial condition of the four state-owned commercial banks in terms of collection of money from defaulters, reducing the ratio of defaulted loans, development of the capital base, growth of loans, profit, etc.
According to the information of the concerned branch of the Central Bank, Janata Bank has failed to show efficiency in all aspects so far this year. Bangladesh Bank has fixed loan limits for each of the four state-owned banks based on the NPL ratio. Yet Janata Bank has crossed this limit. Still, 64 percent of Janata Bank's total loans were large loans. However, the bank had a maximum limit of 30 percent for large loans or loans to large customers.
Mohammad Abdul Jabbar, managing director and chief executive of Janata Bank, told The Daily Messenger, 'It is not possible to reduce the amount of large loans if you wish. The bank has taken out a five-year plan to reduce the number of large loans.
“We are not giving new loans to large borrowers. So our loan amount will not increase in the coming months. Apart from big loans, we are also focusing more on small loans,” added the official.
According to bank sources, the default amount of 17 big borrowers at Janata Bank is Tk 10841 crore. This is higher than the total large-borrower loans of the remaining three state-owned banks.
Meanwhile, according to Bangladesh Bank sources, Janata Bank is unable to collect money from its big defaulting customers. In the first six months of this year, cash collection from the top 20 defaulters at Janata Bank amounted to Tk 16 crore. This is two percent of the target.
Messenger/Fameema
