Around a decade ago, the government announced a special fund, dubbed "Kalyan Onudan", under the "One House One Farm" scheme to improve the quality of life of rural poor and unprivileged by providing them with low-cost loans.
It was said that if a member of a Gram Unnayan Samity (village development association) formed under the project deposited Tk2,400 annually, the government would match the amount.
Even though the government allocated the money for the beneficiaries according to its announcement, the members of the samities have barely benefited from it as the money is lying in the Palli Sanchay Bank, which currently amounts to Tk3,445 crore, according to the Bangladesh Bank.
An inspection report of the central bank has revealed that it is not clear whether the samity members or the bank are the owners of the money.
The One House One Farm scheme under the social safety net programme was launched in 2009. Later it was renamed "Amar Bari Amar Khamar". Palli Sanchay Bank started operations in 2017 to give the One House One Farm project an institutional form, but the project was finally handed over to the bank in June 2021.
The Bangladesh Bank report is based on an inspection of the head office of Palli Sanchay Bank last year. The inspection report was sent to the Ministry of Finance on 14 September this year, according to central bank sources.
The Bangladesh Bank report says, "The government allocated funds to provide loans among samity members against their deposits during a certain period of time. The members were told that if they deposit Tk2,400 in a year, the same amount will be given to them from the government fund. And they deposited money accordingly. But the money given by the government is showing in the bank statement."
"That means, the government incentive has not been distributed at the customer level and there is dissatisfaction among customers in this regard," says the Bangladesh Bank.
Palli Sanchay Bank is clueless about missing Tk274cr
The Bangladesh Bank inspection team also found that the amount deposited in the account decreased by Tk274 crore to Tk3,445 crore in FY21 from Tk3,719 crore in FY20. But, the Palli Sanchay Bank authorities could not provide any information about where the money went.
The central bank did not get any information about how much money was actually transferred from the project to Palli Sanchay Bank, and how much money the bank has distributed among the samity members either.
The Bangladesh Bank has sought an explanation from the management of Palli Sanchay Bank regarding the unexplained decrease in balance along with documented evidence and actual information about the welfare fund.
Bankers came in late in the project
Palli Sanchay Bank Managing Director Khondokaer Ataur Rahman told The Business Standard that the money received from the government as welfare fund was basically allocated for the samities under the project.
"The project has been running for 10 years. Money from the government may have been given to the samities. But there might have been inconsistencies in some cases, which is why the money was transferred to the bank in 2021," he said.
Khondoker Ataur Rahman also said that although Palli Sanchay Bank was born from the One House One Farm project, there was no involvement of any banker with the project until the project was handed over to the bank in 2021.
As a result, there are many inconsistencies in the management of the bank, which are now being gradually eliminated, he continued, "If the plans taken by us are implemented consistently, the anomalies will be removed in the next two to three years and the bank will be run properly then."
Skimping on loans
The Bangladesh Bank reviewed the fund management by Palli Sanchay Bank and found that the branches of the bank are unable to disburse loans due to a shortage of funds, while the bank has deposited Tk2,721 crore in various banks and financial institutions.
"Depositing money in various banks and financial institutions without disbursing loans for the economic activities of the poor and underprivileged people goes against the main purpose of establishing the bank," says the central bank.
Money kept in low-yield accounts
According to the Bangladesh Bank, of the total amount of Palli Sanchay Bank's deposits in various banks, the amount kept as short-term deposits is Tk1,659 crore and term deposits are Tk1,060 crore.
That means, more money is deposited in accounts that yield less interest income, which, the central bank says, is not acceptable.
The Bangladesh Bank also senses anomalies with regard to the term deposits of Palli Sanchay Bank.
As of 30 June last year, the bank has fixed deposit receipts of Tk304 crore with Bangladesh Commerce Bank. In the previous financial year, the amount was Tk259 crore.
Palli Sanchay Bank is increasing its FDRs with Commerce Bank every year even if the latter did not encash the former's deposits upon their maturity, the central bank has found.
Realising deposit from Commerce Bank "uncertain"
The Bangladesh Bank report mentions that realisation of this huge amount kept in Commerce Bank has become uncertain.
During the inspection, Bangladesh Bank officials also found evidence of creation of fake loans in the name of samity members and embezzling money without depositing it in the bank by collecting loan instalments.
According to the report, Zobair Hossain, field assistant of Mirzapur branch of Tangail and Md Sajib Miah created fake loans in the name of various members of the society, embezzled members' savings and loan instalments.
"Through various serious irregularities, field assistants Md Sajib Mia, Jobair Hossain, and Billal Hossain, and branch manager and officer Md Kamruzzaman embezzled a total of Tk1.85 crore. Besides, the amount of money in the hands of the manager/president of the society is Tk18.96 lakh.
"Even the cash assistant of the branch Lavlu Miah, and field assistants Mithun Chandra, Jobair Hossain, and Md Sajib Mia have been involved in online gambling for two years and defrauded the bank's money," the report says.
The Palli Sanchay Bank managing director said many of the workers at the field level had no idea that the savings or instalments should be collected from the members and deposited in the bank. Now they are trying to bring them under the banking rules gradually, he added.
The Bangladesh Bank says the net profit of Palli Sanchay Bank in fiscal year 2020-21 is Tk357 crore, which was Tk235 crore in the previous year.
As per rules, dividend is supposed to be paid to the shareholders from the net profit but the bank did not pay any dividend to the shareholders in the past two financial years.
Bank officials told the inspection team that the bank provided a 5% dividend in FY18 and 7.50% in FY19, but could not provide any document in support of their claim.
According to the law, the government is supposed to own 51% of the bank and the samity members 49%, but in reality, the government now owns 72.36% stakes in the bank, the Bangladesh Bank says.