Social Islami Bank protests LC scam report, bdnews24.com responds

bdnews24.com reported the bank allowed two companies to open back-to-back LCs for the import of goods for years in a breach of rules

Social Islami Bank Limited has protested against news reports on irregularities involving nearly $1.6 billion back-to-back letters of credit issued to two companies.

In a rejoinder on Tuesday, the bank termed the reports “misleading, untrue and deliberate”.

“The reports can spread confusion among people, which is unacceptable.”
bdnews24.com published a report – $1.6bn vanishes from Social Islami Bank through rogue LCs – on Monday.

The report referenced Bangladesh Bank’s findings to say that the SIBL allowed Sharp Knitting and Dyeing of Gazipur to import goods worth over $1.58 billion by using 889 back-to-back LCs, even though the company did not renew the licence for its bonded warehouse, which is a must to avail such facilities. 

Gazipur Blithe Fashions Ltd opened 350 back-to-back LCs and imported $5.5 million in raw materials without having any bonded warehouse.

The companies did not export goods that were supposed to be produced with imported materials. Central bank officials did not find the goods matching the imports in the firms’ warehouses during an inspection.

Now the SIBL is liable to pay for the imports of goods worth around Tk 160 billion.

The bank rejected the claim, saying it had approved a certain amount of investment in Sharp in 2015 and  issued 881 local back-to-back LCs for the company to collect raw materials worth Tk 1.39 billion, against which Tk 222.6 million is still due.

Sharp was also given Tk 1.17 billion as project finance, according to the rejoinder. 

It said Sharp exported goods worth Tk 1.44 billion.

Sharp now owes the bank Tk 1.63 billion, including profits, the SIBL said.

“Therefore, the news of issuing $1.59 billion or Tk 160 billion back-to-back LCs is utterly false.”

The SIBL added it started a case against the company under the Negotiable Instruments Act for not paying up the dues regularly and the process to file another case with the Financial Loan Court was ongoing.

“The customer [Sharp owners] has also maintained communication with the bank to repay the debt.”

About Blithe, the SIBL said the company currently owes the bank Tk 112.8 million and it exported goods worth Tk 906.5 million until 2018.

Both customers mortgaged their factory lands and buildings to the bank, it said. 

The bank claimed the companies were given local back-to-back LCs to collect raw materials from the domestic market, not the facilities kept for those with a bonded warehouse.

“Such unsubstantiated reporting has damaged the bank’s image and goodwill.”

WHAT BDNEWS24.COM CORRESPONDENT SAYS

bdnews24.com’s report is based on the Bangladesh Financial Intelligence Unit’s investigation.

The BFIU has also informed the Customs Intelligence and Investigation Directorate about the matter.

The SIBL admitted to allowing the companies to open back-to-back LCs and the number of LCs mentioned by the bank almost match the one found by the BFIU.

The bank said it started a case over the dues, but there is a huge difference between the amounts mentioned by the SIBL and the BFIU.

The SIBL said Sharp exported goods worth Tk 1.44 billion and Tk 906.5 million. In that case, the companies do not have any dues over the LCs as the bank claimed the companies owe it Tk 1.85 billion over the LCs.

The BFIU said it did not find goods that match the accounts of LCs in the companies’ warehouses.

The SIBL did not touch upon the matter.