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BB detects Tk 162cr loan scam in Mercantile Bank Ctg branches

AKM Zamir Uddin

Mercantile Bank disbursed Tk 162.59 crore to Chittagong-based three little-known companies violating the banking rules and regulations and the bank is now struggling to recover the loans, an investigation by Bangladesh Bank found.
BB officials told New Age that the bank might not be able to recover the loans as it had no control and monitoring on the three companies.
The three little-known companies are Mismac Ship Braking Industry, Regent Corporation and Titas Agro Industry.
According to the report of BB inspection carried out in June-July this year, Agrabad and Madam Bibir Hut branches of the Mercantile Bank disbursed the six-month loans for opening of letters of credit and 3-month time loan between 2011 and 2012.
The report said the bank opened three LCs (by granting six-month loan) worth Tk 136.21 crore in May and June of 2012 by taking 10 per cent margin from Mismac.
Mismac failed to repay the loan amounting to Tk 122.59 crore (excluding the margin) in due time resulting that the bank created a fresh ‘forced loan’ against the company by giving it six more months to repay the loan.
Subsequently, the Mismac also failed to repay the forced loan.
The Agrabad branch disbursed a separate time-loan amounting to Tk 20 crore to the company on September 30, 2012 without any mortgage.
The credit administration of the bank made a debit instruction to the branch to disburse the loan to Mismac without placing any proposal to its board of directors.
The bank also failed to recover the loan. The amount of the time loan with its interest stood at Tk 23.97 crore as of September 4.
After finding the anomalies, the central bank on September 4 this year asked the bank to bracket the LC loan as ‘sub-standard defaulted loan’ and time loan as ‘bad category defaulted loan’ by September 30.
A bank has to keep 50 per cent provisioning against sub-standard loan and 100 per cent provisioning against bad loan which hit the bank’s profit.
The Mercantile Bank, however, did not declare the loans defaulted and sought additional time.
The BB on November 14 asked the bank to recover the money by December 31 or declare the loans as bad category defaulted loans if it fails to recover the loan by that time.
The BB report said that the bank had faced a loss amounting to Tk 146.56 crore due to the loan disbursement to Mismac.
In another incident, the Ahgrabad and the Madam Bibir Hut branches of the bank opened 10 LCs against Regent Corporation and Titas Agro Industry in September 2011.
The two branches paid the import cost to the exporters by creating payment against documents on behalf of the two companies without taking any approval from the bank’s board, BB report said.
The bank failed to recover the loan and it had to declare Tk 19.60 crore as defaulted loan.
Meanwhile, the bank filed cases with the Artho Rin Adalat against the two companies.
The bank has been asked to inform the central bank by January 7, 2014 what kind of punitive measure would be taken against the anomalies and instructed the bank to recover the loans.
The bank earlier informed the BB that it had discharged its chief of the credit administration department form the job due to his collaboration with the scam.
Besides, the bank also transferred the Agrabad branch manager and stopped his promotion and increments for two years.
Sources in Mercantile Bank claimed that Nanda Dulal Bhattacharya had recently been transferred to credit administration department as its chief from the Agranbad branch due to his collaboration with the scams.
But virtually Nanda was rewarded as the current post is more important place than a managerial post of a branch, they said.
When asked about the matter, Nanda Dulal declined to make any comment in this regard.
When asked about the financial scams, Mercantile Bank managing director M Ehsanul Haque told New Age last week that he would not make any comment in this regard. 

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BB detects Tk 162cr loan scam in Mercantile Bank Ctg branches

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