BB brings back lending curbs for National Bank

The central bank has ordered National Bank Ltd not to disburse more than Tk 10 crore in loans to a single borrower as the lender is going through uncertainties after its Managing Director Md Mehmood Husain stepped down.

Besides, the private commercial bank has been allowed to disburse loans to a few sectors: working capital and loans to the cottage, micro, small and medium enterprises, according to a Bangladesh Bank letter sent to NBL on January 22.

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The Bangladesh Bank has taken the decision to protect the interest of the depositors, said its spokesperson Md Mezbaul Haque.

"The managing director of the bank has submitted his resignation letter to the board, creating uncertainty about the operation of the bank. So, the central bank has beefed up its monitoring."

The private commercial bank has been allowed to disburse loans to a few sectors: working capital and loans to the cottage, micro, small and medium enterprises

As part of the move, NBL has been instructed not to disburse more than Tk 10 crore in loans to a single borrower, he said.

Husain submitted his resignation letter to the board on January 18. Sources at the central bank and NBL said that the board had asked him to resign.

He, however, cited personal reasons in the letter.

A good number of managing directors of the lender had earlier faced the same consequence amid pressure from the board, said the sources.

"The central bank will investigate if the resignation of the managing director was done complying with central bank rules," Haque said.

As per the central bank's order, NBL will not be allowed to renew the existing loans without recovering a certain cash portion of the credits.

In addition, the bank has not been permitted to open letters of credit if it does not secure a 100 per cent margin from importers.

If the lender wants to disburse loans of more than Tk 10 crore, it will have to take prior approval from the central bank. The central bank also asked the bank not to take over any loans from other banks and non-bank financial institutions.

In the past, the BB also imposed a similar ceiling on the loan disbursement of the bank before relaxing the conditions later.

This is because non-performing loans have remained at an elevated level: defaulted loans at NBL stood at Tk 11,336 crore in September, up 147 per cent from a year ago, data from the BB showed.

Neither Mehmood Husain nor Ron Haque Sikder, a director of the bank, could be reached for comments, while the contact number of Syed Rois Uddin, a deputy managing director and the acting MD of NBL, was not immediately available.