Bangladesh’s banking sector screwed by rampant looters

Bangladesh, Banking sector, Loan

Bangladesh’s banking sector is currently embroiled in a series of major scandals, characterized by rampant looting and fraudulent loan practices that proves – this sector has been screwed by rampant looters, majority of whom enjoy impunity due to their influence being “blue-eyed-boys” of the ruling party.

The cases of borrowers such as Murad Enterprises, Ideal Flour Mills Ltd, and Silver Food Industries Limited serve as stark examples of how influential individuals have exploited the banking system, causing severe financial instability. This situation highlights the urgent need for stringent regulatory oversight and reforms to restore integrity and accountability in the banking sector.

Murad Enterprises, owned by Golam Sarwar Chowdhury (Murad), exemplifies the depth of corruption within Bangladesh’s banking sector. Between December 6 and December 15, 2022, Murad secured a loan of BDT 15.40 billion from the Chaktai Branch of Islami Bank in Chattogram city. This loan followed an earlier loan of BDT 8.90 billion in December 2021, which was later renewed and increased to BDT 15.40 billion in December 2022. Despite these substantial loans, no import records were found in the National Board of Revenue’s (NBR) server, raising serious questions about the legitimacy of the business operations.

The company’s provided BIN (Business Identification Number) was later found to be fake. A physical inspection of the company’s supposed location revealed a small 300 square-feet, vacant shop, starkly contrasting with the claim that goods worth BDT 15.40 billion were stored there. Local businessmen confirmed that the CI (Corrugated Iron) sheet business, which Murad Enterprises claimed to be involved in, did not require such massive capital. The company’s collateral for the loan, a BDT 2.70 billion Fixed Deposit Receipt (FDR) from First Security Bank, Union Bank, and Global Islami Bank, also appeared dubious.

Ideal Flour Mills Ltd. presents another glaring example of fraudulent activity. The company, owned by Mohammad Forkan and Qutub Uddin, obtained a loan of BDT 9 billion from Islami Bank’s Chawkbazar branch in Chattogram city between September and October 2022. Forkan and Qutub purchased the factory in April 2022 for BDT 270 million. The factory, allegedly involved in producing flour, flour, and semolina, was found closed in Magapukur Par, Sitakunda in Chattogram, since Ramadan 2023. Despite claiming significant business activities, no relevant records were found in the NBR servers.

The loan documents revealed that Forkan and Qutub registered for income tax and established the company only days before applying for the loan, with no prior business experience. The collateral for the loan, including factory buildings, machinery, and land, was significantly overvalued. Despite claims of substantial imports and exports, no such records were found under Ideal Flour Mills’ name, further highlighting the fraudulent nature of the operations.

Silver Food Industries Limited, led by its Chairman Mamunur Rashid and Managing Director Mehdi Hasan, secured a loan of BDT 10 billion from Islami Bank’s Andarkilla branch in Chattogram city within a month and a half in early 2023. Despite this massive amount of loan, investigations revealed that the company’s supposed address in Khatunganj, Chittagong, was non-existent, and its operations were minimal. Locals reported that Mamunur Rashid, who had been in Saudi Arabia for many years, did not have significant business operations upon his return to Bangladesh.

The factory, located in the BSCIC industrial area of Sagarika City area in Chattogram, was a modest flour processing unit previously owned by Farid Ahmed, who sold it for BDT 180 million. The factory’s capacity was insufficient to justify the BDT 10 billion loan, and no import records were found under Silver Foods’ name. The collateral for the loan, including land and machinery, was grossly overvalued at BDT 1.90 billion.

These cases underscore a troubling pattern of fraudulent borrowing facilitated by influential individuals with connections to the banking sector. M/s Murad Enterprises, Ideal Flour Mills Ltd., and Silver Food Industries Limited all had ties to the leaders of S Alam Group, a powerful conglomerate in Bangladesh. The involvement of high-ranking bank officials, such as Miftah Uddin, then head of the Corporate Investment Wing and International Services Wing Division of Islami Bank, indicates a deep-seated issue of corruption within the banks.

The regulatory authorities, particularly the Bangladesh Bank, have failed to address these irregularities effectively. The lack of stringent oversight and accountability has allowed such fraudulent activities to persist, threatening the stability of the entire banking sector. The government’s inaction, despite clear competition law violations and widespread criticism, further complicates the situation.

The fraudulent activities of Murad Enterprises, Ideal Flour Mills Ltd, and Silver Food Industries Limited have far-reaching consequences. The large sums of money involved in these fraudulent loans, coupled with the overvaluation of collateral and lack of legitimate business operations, have significantly weakened the financial health of the banks involved. This erosion of capital affects the banks’ ability to provide genuine businesses with necessary funding, ultimately hampering economic growth and development.

Moreover, the exposure of such widespread corruption undermines public trust in the banking sector. Depositors and investors may lose confidence in the banks’ ability to safeguard their money, potentially leading to a withdrawal of deposits and reduced investment in the financial system. This loss of confidence can trigger a banking crisis, with severe implications for the broader economy.

The alarming state of Bangladesh’s banking sector necessitates immediate and decisive action. The government must enforce strict regulations and ensure that the Bangladesh Bank exercises its supervisory role effectively.

Transparent investigations into these fraudulent loans and the individuals involved are crucial to restoring public trust and financial stability.

Implementing comprehensive reforms to enhance the accountability of bank officials and prevent the undue influence of powerful individuals is essential.

Strengthening the mechanisms for loan approval, verification of business operations, and monitoring of collateral is vital to prevent future fraudulent activities. Additionally, fostering a culture of integrity and transparency within the banking sector will help mitigate the risks associated with corruption and mismanagement.

One of the first steps should be the establishment of an independent regulatory body specifically tasked with overseeing loan disbursements and ensuring compliance with banking regulations. This body should have the authority to conduct thorough audits and investigations, with the power to impose penalties on banks and individuals found guilty of fraudulent activities.

Furthermore, there should be a concerted effort to digitize and integrate the banking system with the NBR and other relevant authorities. This would enable real-time verification of business operations, import-export activities, and tax compliance, thereby reducing the scope for fraudulent practices. Enhanced data sharing and transparency can help identify and address discrepancies more swiftly.

The cases of Murad Enterprises, Ideal Flour Mills Ltd, and Silver Food Industries Limited illustrate a severe crisis in Bangladesh’s banking sector. The rampant looting, facilitated by influential individuals and negligent regulatory authorities, poses a significant threat to the nation’s financial stability.

Immediate intervention, stringent measures, and comprehensive reforms are imperative to restore accountability and integrity within the banking sector.

The government and regulatory authorities must act decisively to protect the interests of the public and ensure the sustainable development of the country’s financial system. Without such measures, the entire nation may face dire consequences, with the banking sector’s credibility and stability hanging in the balance. It is time for Bangladesh to confront these challenges head-on and build a robust, transparent, and accountable banking sector that can support the country’s economic growth and prosperity.


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