A Bangladesh Bank investigation has found that Premier
Bank Ltd did not keep Tk 370 crore as provision against its loans and advances
including classified loans in the last year.
But the central bank without giving the bank any
punishment is set to allow the bank to keep the provision by December this
year, said sources in the BB.
The BB inspection team recently conducted detailed
inspections at different branches on financial position of the bank till
December 31, 2014 and found that the bank hid the provision shortfall.
‘Our assumption is that the bank did not keep the
provision to show higher net profits and give dividends to the shareholders,’
said an official of the BB.
In its financial data, the bank had sent to central bank
earlier showed there was no provision shortfall as of December 31, 2014, he
said.
Every bank has to keep 20 per cent provision against
their classified sub-standard loans, 50 per cent against defaulted doubtful
loans, and 100 per cent provision against defaulted bad loans.
Besides, the banks have to keep provision between 0.50
per cent and 5 per cent against their regular loans and special mention
category loans to ensure a sound financial health.
‘The latest financial position of the bank shows that its
financial health was not good,’ said the BB official.
BB sources said that Premier Bank had applied to the
central bank on March 9, 2015 to enjoy three-year period to manage its
provision shortfall of Tk 370 crore on a phase-to-phase basis as it is now
unable to keep the required provision due to its weak financial health.
They, however, said that it was an unusual application to
enjoy extended time facility from any bank to manage the provision as every
bank had to keep the provision against their standard and defaulted loans for
ensuring a better financial health.
The central bank is likely to give one-year period to the
bank to manage the required provision considering its weak financial condition,
he said.
A BB official said that the central bank would impose
embargo on Primer Bank against offering cash dividend to their shareholders due
to its large amount of provision shortfall.
The central bank data showed that the provisional net
profit of Premier Bank had increased to Tk 88.04 crore in 2014 from Tk 56 crore
in 2013.
The banks calculate the net profit by deducting the
required provision and corporate tax from the operating profit.
The operating profit of the Premier Bank stood at Tk
184.04 crore as of December 31, 2014.
The net profit of Premier Bank would convert into net
loss in 2014 if it had kept the required provision.
The Premier Bank managing director Khondker Fazle Rashid
told New Age on Wednesday that his bank had faced the provision shortfall of Tk
370 crore due to an increased trend in the defaulted loans.
‘Against the backdrop, we have sought three-year time
from the central bank to keep the required provision. Besides, we will take a
strong recovery programme to recover the defaulted loans’, he said.
He said that his bank had already recovered Tk 100 crore
from Dhaka North City’s mayor aspirant Sayeed Khokon.
When asked why the bank had not showed that there was a
provision shortfall to BB, Fazle Rashid said that he had recently joined the
bank and referred the issue to the additional managing director Abu Hanif.
Hanif, however, said that he would not give ‘such
sensitive information’.
The BB data showed that
defaulted loans in the Premier Bank stood at Tk 630.51 crore as of December 31,
2014. (Source: New Age, April 2, 2015)