5 banks, NBFI in trouble as Ershad Brothers defaults on loans

HM Murtuza | Published: 00:00, Sep 28,2019


At least four banks and one non-bank financial institution have been in trouble because of issuing excessive loans — Tk 281.23 crore — to little-known Ershad Brothers Corporation.

Moreover, the entity has planned to take more money from banks, taking the advantage of inadequate risk assessment by the banks, bankers told New Age.

Almost all of the financial entities are struggling to recover the money as Ershad Ali, chairman of Ershad Brothers Corporation, has been failing to repay the money, resulting in classification of the majority of the loans as bad loss.

Banks also said that they had already engaged in discussion with the borrower to cover the risk by taking fresh collateral.

Of the outstanding loans amount, Ershad Brothers Corporation’s loans with AB Bank stood at Tk 148 crore, South Bangla Agriculture Bank Tk 83.29 crore, Phoenix Finance and Investments Tk 29 crore, BRAC Bank Tk 15.05 crore and Southeast Bank Tk 5.89 crore.

The issue surfaced when court issued arrest warrant against Ershad in a case filed by AB Bank to recover defaulted loans and subsequently the police raided his residence on September 24.

The bank has been financing Ershad for last 10 years and the bank has filed four cases against Ershad to realise the outstanding loans.

‘We have taken tough stance against the loan defaulters and our drive to realise loans from the defaulters will continue,’ AB Bank president and managing director Tarique Afzal told New Age recently.

Officials of the South Bangla Agriculture Bank said that they had taken over loans of Ershad Brothers from Bank Asia several years ago when the borrower was financially sound.

However, the entity has faced business setbacks in recent years that resulted in instalment default, they said.

They said Ershad had regularised his loans by giving a flat as collateral.

‘The entity failed to manage to deal with repayment pressure of the excessive bank financing,’ SBAC Bank managing director Md Golam Faruque told New Age.

He, however, said that almost entire outstanding loan amount of the bank was covered with collateral and the bank was trying to take more collateral to cover the entire loans.

Asked, Southeast Bank managing director M Kamal Hossain told New Age, ‘The borrower has intention to take around Tk 100 crore from our bank, but we have issued Tk 5 crore initially to check the client’s repayment capacity.’

The outstanding loan amount has stood at Tk 5.89 crore, he said.

Taking the recent situation into consideration, Southeast Bank has planned to phase out financing Ershad by the way of selling flats which he had given as collateral.

Asked, Ershad, who started rickshaw business in his early life, told New Age that losses in stone business and dull state of his other business including rod, cement and tiles in 2012-16 were the reasons for his failure in repaying bank loans.

Besides, his illness in recent years forced him to abstain from monitoring his business properly, he said.

He said his company had around 175 trucks which he procured with self and banks’ finance for providing stone for the construction of Padma Bridge.

Meanwhile, the authority denied accepting stone from one shipment that he imported from Indian supplier at the cost of Tk 42 crore as the supply was substandard and the comply lost entire work orders from the Padma Bridge project, he said.

He had nothing to do except selling those stone at far lower price at the local market.

Besides, the heavy trucks which he procured for providing stone to Padma Bridge project, have remained idle, Ershad said.

He, however, said that his business had improved a bit in last couple of years.

Speaking about the AB Bank’s loan issue, he said he had paid Tk 50 lakh to AB Bank recently as per the instruction of its officials.

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