The Bangladesh Bank has dissolved the board of directors of National Bank – an institution long mired with allegations of lacking good governance, failure to disburse loans, and inability to preserve deposits. A new board of directors has already been formed.

Central bank Executive Director and Spokesperson Md Mezbaul Haque confirmed the matter on Thursday.

Dr Syed Ferhat Anwar will serve as the chairman of the newly formed National Bank board of directors. He is the incumbent Independent Director of Meghna Bank.

The Bangladesh Bank has dissolved the board of directors of National Bank on the ground of lack of governance and deterioration of financial health.

Contacted, Md Mezbaul Haque, spokesperson for the Bangladesh Bank, confirmed the news on Thursday (21 December).

Syed Farad Anwar, currently serving as an independent director at Meghna Bank, has been appointed as the chairman of the newly established board of directors of National Bank.

The board comprises the Bangladesh Bank’s former executive director Sirajul Islam, former managing director of Southeast Bank Md Kamal Hossain, Khalilur Rahman, Parveen Haque Sikder, Shafiqur Rahman and Moazzem Hossain as directors.

Three directors from the former board have been designated for the new board, while the remaining directors were declared ineligible, said the central bank spokesperson.

Using a bank as a family wealth

The banking regulator handed over a letter to the private commercial bank in this regard today to its managing director Md Mehmood Husain, according to central bank sources.

The chamber judge of the Supreme Court’s Appellate Division on 19 December imposed a status quo on the holding of the annual general meeting (AGM) of the National Bank until 21 January 2024.

The AGM for 2022, which was scheduled for 21 December on a digital platform, will not be held on time due to the status quo, according to officials at the private sector lender.

The High Court had earlier stayed the AGM upon an application by a director of the bank.

Earlier in May, National Bank had decided to hold the AGM on 17 August, but in July, it postponed the AGM. Later, in October, the bank set the new schedule to hold the AGM on 21 December.

Financial performance

The National Bank incurred a heavy loss of Tk1,123 crore in the first nine months of 2023, which was 214% higher than the previous year at the same time.

According to its disclosure published on stock exchanges, the consolidated loss per share stood at Tk3.49 during the January–September period.

The bank said it had to classify a significant amount of loans as borrowers could not repay loan instalments in time because of a liquidity crunch in the market due to higher inflation in the world economy as well as in Bangladesh.

Tk335cr scam rattles National Bank

“Interest on such loans and advances could not be applied to income. Consequently, profitability and EPS (earnings per share) decreased significantly,” reads the disclosure.

In 2022, the bank incurred a huge loss of Tk3,260 crore as its borrowers could not repay their instalments on time, and a significant amount of loans became classified.

Due to the high loss, the bank failed to pay any dividends to its shareholders in 2022. It did not pay any dividends in 2021 as well.

The default loan rate of the bank stood at 29.47% in September this year, which was the second highest among private banks.

It also faced a whopping provision shortfall of Tk13,797 crore as a consequence of high default loans.

Provision is the fund set aside by banks to pay for anticipated future losses. High-default loans require banks to maintain higher provisioning, which is kept from their profits.

Rising provision shortfalls cause banks’ capital to erode, reducing lending capacity and, ultimately, putting public money at risk.

It was identified as one of the ten weak banks by the Bangladesh Bank after Governor Abdur Rouf Talukder took charge.

The central bank suspended the lender’s loan activities in May 2021 against the backdrop of a liquidity crisis caused by huge loan irregularities.

Later, the suspension was withdrawn in December 2021 in the wake of an improvement in the liquidity situation.

But, even after the long suspension, loan-related irregularities continued to take place in the bank, prompting the central bank to go for further suspension in May last year. However, this time, the suspension was partial, limiting its lending.

National Bank shares were traded at Tk8.30 each yesterday, which was below their face value of Tk10 each, at the Dhaka bourse.