Uttara Finance and Investments, a non-bank financial institution where automobile distribution giant Uttara Group has a substantial stake, has emerged as a hotbed for loan irregularities involving about Tk 6,000 crore, jeopardising depositors’ money.

From lending money to director’s company without any application to paying huge amounts of cash to its chairman for no concrete reason, from creating fake loans to pave the way for Uttara Group to withdraw Tk 335 crore to the managing director taking out money without any approval, the NBFI, which has been flying under the radar, has indulged in a host of indiscretions.

The irregularities were unearthed by a recent Bangladesh Bank inspection on the books of NBFI until 2020. Dhaka Tribune has a copy of the inspection report.

“The Bangladesh Bank found a big imbalance in the financial report of Uttara Finance,” its spokesperson Md. Serajul Islam told Dhaka Tribune on Saturday.

A letter has already been sent to the NBFI asking for an explanation in this regard, he said, adding that Uttara Finance is yet to send in its reply.

But SM Shamsul Arefin, managing director and chief executive officer of Uttara Finance, told Dhaka Tribune that the NBFI has sent its response on January 5.

“The matter is very confidential, so I cannot say more. We will inform the media about the issue after receiving the Bangladesh Bank’s reply.”

Uttara Finance’s chief financial officer has died from Covid-19, according to Arefin.

“This is the reason for the imbalance in our financial statement,” he added.

Lending to director's company without paperwork

Uttara Finance disbursed Tk 521 crore to its director’s related company without any loan application, let alone a loan approval, found the BB investigation.

The NBFI provided another Tk 248 crore to its subsidiary company, Uttara Finance and Capital Management, as a margin loan without approval.

A margin loan is a loan provided to invest in the capital market using existing shares, managed funds and/or cash as security. It is a type of gearing, which is borrowing money to invest.

The inspection team did not find any documentary evidence of whether the fund was actually used to buy any shares of a listed company.

The fund was disbursed by cheques signed by the MD and CFO as per the verbal instructions of the directors.

At the end of 2019, Uttara Finance disbursed Tk 1,201 crore as ‘advanced and repayment’ and ‘investment in share’ to its director’s related company without approval. But the NBFI showed only Tk 311 crore to its balance sheet, according to the BB investigation.

Arefin, present CFO Kazi Arifuzzaman and the other concerned officials could not give any explanation about the deficit of Tk 890 crore, the central bank report said.

The NBFI issued a term deposit receipt (TDR) of Tk 236 crore to its director Mujibur Rahman’s company Bluechip Securities. However, Uttara Finance did not take any money against the TDR and there were no valid vouchers against the TDR.

If the director’s related company takes loans from another bank or NBFI using fake TDR, its liability will have to be borne by Uttara Finance, which is very risky, said the inspection report.

Chairman takes out cash for no reason

The central bank has found huge amounts of cash transactions as ‘company expenditure’ under ‘advanced and repayment’ although there is no such scope as per rules.

The bulk of the amount went to Rashidul Hasan, its chairman, at various times.

At the end of 2019, the total amount in the ‘advanced and repayment’ sub-head stood at Tk 799 crore.

The huge amounts of unusual transactions were not mentioned in the audited financial statement, found the BB investigation.

Hasan could not be reached for comment on the report.

MD withdraws money at will

Arefin has withdrawn Tk 24 crore on various occasions by showing management expenditure. The withdrawals were never authorised. However, he has returned some of the sums.

The BB inspection found Arefin paid Tk 6 crore to the South Bridge Housing through two separate transactions, Tk 1 crore to Bay Development, Tk 50 lakh to DHS Motors and Tk 48 lakh to Uttara Motors for purchasing cars.

When the BB inspection team asked him about the issue, the MD said he withdrew the sum for the treatment of his son, who is suffering from an incurable disease.

“It was interesting that the company did not create any loans in the name of MD and any interest has not been calculated, which is a big irregularity,” the report said.

Uttara Group grabs Tk 335 crore

Uttara Motors, the sole distributor of Indian Bajaj Auto and Maruti Suzuki in Bangladesh, and the other companies of Uttara Group took Tk 335 crore in the name of ‘short-term loan repayment’ and ‘long-term loans’ from the bank account of Uttara Finance through 118 transactions without approval.

Money has been withdrawn in the name of fake loans in 2020 too, as per the inspection report.

However, Matiur Rahman, chairman of Uttara Motors and a director of Uttara Finance, denied the issue.

“According to the law, I cannot take a loan from the NBFI as I am a director of the company. I will tell you all the details if you come to my office tomorrow,” he told Dhaka Tribune on Saturday.

Conceals information

At the end of 2019, the company’s balance sheet showed total term deposit of Tk 1,877 crore after an audit. But the inspection team found that the actual term deposit was at Tk 2,603 crore.

The NBFI’s total loan or lease was shown to be Tk 1,803 crore in its balance sheet but the central bank found the actual figure to be Tk 3,802 crore, which was a direct violation of the laws, as per BB report.

The central bank found that Uttara Finance borrowed Tk 398 crore from the call money market but the company showed only Tk 16 crore in its financial statement.

The call money sector of the company has been used by its director for personal needs for a long time, the BB report said.

Most NBFIs acting recklessly

Parking funds with NBFIs have become risky of late, said experts.

Lack of proper supervision and monitoring by the BB is responsible for the bad performance of NBFIs, said Khondkar Ibrahim Khaled, a former deputy governor of the central bank.

The law states what to do if an NBFI goes bad, but the central bank is not following the law. As a result, a number of NBFIs went from bad to worse.

“Had the BB followed the law, PK Halder would not have been able to leave the country,” he added.

Slipped in the red

The NBFI, which was established in 1995, logged in losses of about Tk 15 crore between July and September of last year, in contrast to profit of Tk 33.6 crore.

At the end of September, its deposits stood at Tk 2,073.6 crore, up 8.7 per cent year-on-year.

Its loans stood at Tk 3,440.5 crore at the end of September, in contrast to Tk 3,431.3 crore.

Listed since 1997, Uttara Finance’s shares shed about 28.5 per cent in value over the past two years. On Thursday, they closed at Tk 49.5, up 2.9 per cent from the previous trading session.

In 2019, the company logged in 14.3 per cent higher profit of Tk 118.3 crore for which it disbursed 15 per cent cash and 5 per cent stock dividend. A year it had provided 20 per cent stock dividend.

DhakaTribune