Bangladesh Bank bars NBL from disbursing loans

The Bangladesh Bank has instructed National Bank Limited (NBL) not to disburse any fresh loans before bringing down its advance deposit ratio (ADR) to 87% and improving its financial condition to protect the interests of its depositors.

The central bank on May 3 sent a letter to the bank's managing director about the issue, as per the Section 45 of the Bank Company Act, 1991, said Bangladesh Bank Executive Director and Spokesperson Md Serajul Islam.

As per the central bank regulations, the ADR for conventional banks is 87% and for Islamic banks 92%.

This means, in example, that conventional banks will be able to lend up to Tk87 when its deposits are at Tk100. Islamic banks will be able to lend up to Tk92 from their deposits of Tk100.

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But as of December 31 last year, NBL's ADR stood at 91.57%, higher than the requisite.

The central bank also asked the lender that its total loan and advances' growth cannot exceed 10% per annum.

Before the move, the central bank on April 5 asked the lender not to disburse any loans without BB’s prior approval, as the central bank received allegations that the bank had disbursed a good amount of funds without approval from its board.

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The next day, the BB instructed ASM Bulbul, the acting managing director of National Bank, to refrain from all kinds of activities of the bank as his tenure has expired.

BB asked the bank not to allow Bulbul to get involved in regular banking activities if he was not reappointed.

Finally, the bank board at its 445th meeting decided to appoint Shah Syed Abdul Bari as the bank's managing director.