Janata Bank, once a self-reliant state-owned financial institution, has now approached Bangladesh Bank (BB) for substantial liquidity support of Tk 100 billion to sustain its daily operations.
It has sought a loan at a 4 percent interest rate over a five-year period.
The central bank officials say while they have received the loan application, no decision has yet been made on the matter.
Janata Bank's Managing Director Mazibur Rahman told bdnews24.com, "The fund will be used to meet the bank's daily requirements."
"This is the first time Janata Bank has asked for assistance from Bangladesh Bank," he added, "but the central bank has yet to announce a decision."
The central Bank's spokesperson Husne Ara Shikha declined comment on the issue.
Since the change in government, Janata Bank has been grappling with liquidity challenges.
Large unpaid loans from conglomerates Beximco Group and S Alam Group, taken during the previous Awami League administration, have exacerbated the bank's financial strain.
In light of this, the state-run bank has followed a similar path to other financial institutions, including Shariah-based banks, which received government support following the political shift.
A senior official at the bank told bdnews24.com, "Beximco Group, the bank's largest borrower, has defaulted on its loan, which represents more than 25 percent of the bank's capital.
"The total outstanding amount is nearly Tk 233.28 billion, most of which remains unpaid. This has put additional pressure on the state-owned bank."
Following the ousting of the Awami League government, Beximco Group's Vice-Chairman Salman F Rahman was arrested, further complicating the situation for the business conglomerate.
Beximco's companies are now struggling to pay its workers and employees.
Janata Bank is in the process of issuing a separate loan to help Beximco pay its employees.
To facilitate this, the state-owned bank was granted partial exemption from the Bank Company Act due to the current exceptional circumstances.
Based on special advice from the government, the central bank issued this exemption, enabling the bank to extend further loans to the defaulting Beximco Group.
A senior official of Bangladesh Bank told bdnews24.com that Janata Bank's deposits amounted to Tk 1.11 trillion as of September, with loans reaching Tk 985.37 billion.
However, non-performing loans stood at Tk 604.89 billion, representing 61 percent of the total loan portfolio.
According to central bank data, Janata Bank's net loss as of September was Tk 15.04 billion. The bank is required to maintain a provision of Tk 44.64 billion against these non-performing loans.
Due to liquidity issues, the bank has only been able to set aside Tk 55.5 billion in provisions.
As a result, Janata Bank's capital deficit increased to Tk 339.21 billion by September.
—bdnews24.com
