Bangladesh Bank has asked the National Bank not to disburse any loans without its prior approval.
The banking watchdog recently received allegations that the lender had disbursed a fair amount of funds by bypassing its board approval.
This prompted the central bank to issue the April 5 instruction asking the bank to send detailed information on loans approved and disbursed since December 26 by yesterday.
But the bank yesterday asked for five working days to send the information, saying it was not possible to provide data in a single day, said ASM Bulbul, acting managing director (MD) of the lender.
He said they had not disbursed any large loans, which require council approval, in recent months.
If no board meeting takes place, the bank must obtain authorization from the central bank.
The central bank also asked the National Bank to indicate whether Bulbul was working under a valid contract.
Bulbul was an additional MD before serving the lender as an acting MD.
He admitted that his term ended on March 31, but the bank’s authorization extended it for a month earlier.
But the board has yet to approve the extension, he said.
The board will give its approval as soon as possible, Bulbul said.
The central bank asked the bank not to allow Bulbul to get involved in regular banking activities if it had not been renewed.
But yesterday, Monowara Sikder, the bank’s chairman, issued Bulbul a reappointment letter authorizing a one-month extension.
The National Bank did so in a hurry to legalize Bulbul’s business since its contract expired, which will also help it respond to the central bank’s letter, a BB official said.
The lender has also been asked to provide all documents for any board meeting held since December 26.
The bank’s board of directors was restructured after the death of its chairman, Zainul Haque Sikder, on February 10.
Zainul’s wife Monowara Sikder was elected chair of the board on February 24, but no board meeting has taken place since that day.
Despite this, the bank reportedly disbursed loans breaking the rule, a central bank official said.
Bulbul claimed that the bank’s branches are now providing small-scale loans that do not require prior board approval.
The central bank also asked the bank to send detailed information on loans made to four companies – Rongdhanu Builders, Desh TV, Rupayan and Shanta Enterprise.
Bulbul claimed the lender had already disbursed loans for Desh TV and Rupayan, but had no plans to make loans to the other two.
Md Serajul Islam, spokesperson and executive director of the central bank, said the BB would take action after verifying the documents sent by the lender.
The financial health of the first generation bank began to deteriorate since 2009, when Sikder Group began to take control of the board of directors of the lender.
The central bank earlier discovered a number of irregularities occurring during the sanctioning and disbursement of loans by the National Bank.
The bank had also disbursed a significant amount of loans to directors of other banks.
A number of banks have made such loans as part of a mutual agreement between directors, which has raised concerns about corporate governance in the banking industry.
The bank gave Tk 7,216 crore to directors of other banks, or 18 percent of its total outstanding loans in December last year, according to central bank data.
The bank’s defaulted loans stood at Tk 2,085 crore in December last year, compared to Tk 388 crore in 2009.
The non-performing loans to the bank would have been much higher than the existing amount if the lender had not written off Tk 2,154 crore last year.
The bank also faced a Tk 435 crore provision shortfall last year due to its poor financial health.
In addition, 40 of its 214 branches are suffering losses.
Six banks in the country’s banking sector now have 40 or more branches with losses.