Bangladesh's central bank is investigating irregularities its inspectors have unearthed at a branch of the largely state-owned Rupali Bank.

A special inspection team from Bangladesh Bank (BB) reckons that Rupali Bank may incur losses of up to US$98 million as a result of serious breaches in regulations for letter of credit (L/C) and lending procedures at the branch.

Rules breached

The BB team says it has detected serious breaches of banking rules for opening L/Cs and evidence of bank officials extending credit to pay L/Cs without due regard to the bank's loan approval regulations.

The investigators have named three privately owned companies - Bentex Limited, Mother Textile Mills Limited and Madaripur Spinning Mills Limited - as beneficiaries of irregularities at the bank.

Gross violation

According to the BB inspectors, Bentex was allowed to use the same account at Rupali Bank for export and import transactions, which is a gross violation of banking rules.

Rupali Bank also sanctioned lending of US$3.3 million to Bentex so it could settle overdue L/C payments.

L/C irregularities

The bank allowed Mother Textiles to open deferred L/Cs worth more than US$11 million, even though the company had failed to make payment against deferred L/Cs in the past.

Mother Textiles had also defaulted on other L/C payments, according to the inspectors.

They have referred three Rupali Bank officials to the bank's senior management who the inspectors expect to take "appropriate actions" against the bankers.

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