TL;DR:
- Janata Bank to auction S Alam Group’s mortgaged assets to recover Tk1,850 crore defaulted loans amid allegations of financial irregularities during Sheikh Hasina’s 15-year tenure
- S Alam Group violated single borrower exposure limits, borrowing 420% of Janata Bank’s capital, with widespread irregularities and liquidity issues in S Alam-controlled banks
- Bangladesh Bank dissolved boards of S Alam-controlled banks, froze shares, and called for reforms; investigations reveal massive deposits and suspected money laundering by S Alam Group
- S Alam Group seeks government support to recover business losses due to frozen accounts, citing difficulties in paying salaries, taxes, and honoring contractual obligations
Janata Bank has announced the auction of mortgaged assets belonging to Global Trading Corporation Limited, a subsidiary of the controversial S Alam Group. This action, scheduled for November 20, 2024, marks the first time a bank has moved to auction assets of an S Alam Group company amid allegations of massive loan defaults and financial irregularities during the 15-year tenure of Sheikh Hasina’s government.
The state-owned Janata Bank is attempting to recover Tk1,850 crore in unpaid loans from S Alam Group. The auction will include 1,860 decimals of land across Chattogram and Gazipur. However, bank insiders reveal that the market value of these assets is only Tk358 crore, less than one-fifth of the total amount due, suggesting that further legal steps may be necessary to recover the full debt.
Global Trading Corporation initially borrowed Tk650 crore in 2012 from Janata Bank’s Chattogram Corporate Branch. By September 2024, this amount had ballooned to Tk1,850 crore due to accrued interest. A 2021 audit report by the Comptroller and Auditor General (CAG) highlighted significant irregularities in the loan issuance process, noting that many transactions lacked proper due diligence as required by Bangladesh Bank guidelines. The company also frequently used funds from one loan account to settle liabilities in another, a practice prohibited by banking regulations.
S Alam Group’s borrowing from Janata Bank far exceeds legal limits. The group has reportedly received loans amounting to 420% of Janata Bank’s capital, grossly violating the single borrower exposure limit of 25%. S Alam Group is now the second-largest borrower of Janata Bank, with over Tk7,832 crore in loans. The scale of the group’s financial activities extends beyond Janata Bank, with allegations of syphoning off at least Tk2 lakh crore from various banks, much of which was reportedly laundered overseas.
Recent investigations have uncovered that S Alam Group took approximately Tk180 billion from Union Bank, representing about 64% of that bank’s total loan portfolio. The group’s influence has led to significant irregularities across multiple banks, including concealed defaulted loans. As of August 7, 2024, banks controlled by S Alam Group face severe liquidity issues, with Islami Bank and Social Islami Bank each showing deficits of Tk2,877 crore and Tk2,850 crore respectively.
In response to these widespread issues, the Bangladesh Bank has taken unprecedented action, dissolving the boards of seven banks previously controlled by S Alam Group and freezing shares held by 56 entities and individuals associated with the group in Islami Bank. Governor Ahsan H Mansur has urged people not to purchase any properties belonging to S Alam Group, stating that they will eventually be liquidated to refund bank depositors. He described the situation as “the largest bank heist” in the country’s banking history and called for comprehensive reforms in the banking sector.
Preliminary investigations by the National Board of Revenue (NBR) have revealed that S Alam Group’s owner Saiful Alam, his family members, and their affiliated companies have enormous sums of cash deposited in just six banks, amounting to approximately Tk260 billion. Over the past five years, around Tk1,090 billion has been deposited in various S Alam Group accounts across these banks, with most of the money being loans. There are allegations that the group took loans under various names and laundered the money.
Amid the ongoing crisis, S Alam Group has requested financial, social, and legal support from the government to recover business losses due to the freezing of its bank accounts. The group claims that banks stopped providing services without prior notice, causing difficulties in paying salaries, utility bills, taxes, and honoring contractual obligations. This has led to potential labor unrest and production halts.
As the situation continues to unfold, the auction of S Alam Group’s assets by Janata Bank marks a significant step in the efforts to recover defaulted loans and address the widespread financial irregularities linked to the controversial conglomerate. The current challenges underscore the urgent need for comprehensive banking sector reforms, stricter regulatory oversight, and a thorough investigation into the alleged misconduct of S Alam Group and its associates.
