The state-owned Bangladesh Development Bank Limited (BDBL) is selling out foreclosed land at rates far below the market prices, people familiar with the matter have told the FE.

On an average each year the BDBL is selling land of 30 projects of its loan defaulters, worth more than Tk 1.0 billion, out of 330 such projects, since its inception through the merger of the Bangladesh Shilpa Bank (BSB) and the Shilpa Rin Sangstha (BSRS) in 2010. This year the number of sold-out industrial plots may rise to 40, according to official sources with the bank.

The industrial plots with all infrastructure facilities including those of power and gas connections are located in different industrial hubs at prime locations of the country.

Industrial upland with ready infrastructures is very scarce in the country and the prices are surging by leaps and bounds every year.

The sale of such ready industrial plots belonging to loan-defaulter entrepreneurs is reducing the BDBL's earnings to a large extent and also encouraging an unfair means in the country's key financial sector, sources said.

Sources in the real estate sector said prices of the land would be at least two to three times higher, if those had been sold competitively at the market prices.

Insiders said in many cases the financial institution has been abusing the government's order regarding recovery of the cost of fund, issued in February, 2008.

According to the government order, in cases like natural calamities and death of owners, the bank can accept prices below the cost of fund in selling the project land of defaulter-borrowers.

The BDBL has sold out a number of such plots over the last six months.

It sold out the Shah Mukdom Textile Mills in the BSCIC estate in Rajshahi at much lower prices.

Shah Mukdom Textile Mills, nearly two kilometres north of the Rajshahi City Corporation office, was established on 115 kathas or 82,500 square feet of land and it was an A-type industrial plot.

The market price of the land was Tk 80 million. But it was sold at only Tk 25 million and ruling party lawmaker Enamul Hoque bought it recently.

However, the local people said the market price was far higher, Tk 700,000 per katha, as it is located at the main industrial hub in the country's northern belt.

Enamul Hoque MP of the Baghmara constituency in Rajshahi, who bought the land, told the FE Thursday: "I've actually bought the land at Tk 60 million as I had to pay some money to the owners of the mill."

Mr Enam, who intends to set up a factory on the land, admitted that land prices in the area ranged between Tk 500,000 and Tk 700,000 per katha.

The BDBL sold another industrial plot of the Wase Leather in Gazipur recently at Tk 15 million or 1.5 crore. According to the industry insiders, it should have been sold at more than Tk 40 million.

Moreover, the BDBL has taken a move to sell out another lucrative industrial plot of the Sripur Textile Mills located on 10 acres of land near the Dhaka-Mymensingh Road in Gazipur.

The textile mill owned by late Agha Yusuf was one of the largest mills and it fell into the bad loan category in 1996.

Many influential people are now lobbying to purchase the industrial plot at a much lower price than the disbursed loan amount of Tk 620 million or 62 crore.

The BDBL has already paid Tk 300 million to the Islamic Development Bank (IDB), as the project has failed. The IDB financed the project under a deal executed in 1993.

Most of the projects of the BDBL's loan defaulters were undertaken during the late 1970s or 80s, and a number of their owners are no more alive. In many cases, land of these projects is being sold to close relatives of the loan defaulters through manipulation, sources said.

People familiar with such deals told the FE that while selling such land, the bank did not even comply with the last valuation prepared by its own survey firms.

They also alleged that the BDBL barely published advertisements in newspapers, inviting interested buyers to quote their prices.

A senior official at the bank told the FE: "We cannot avoid political pressure."

He, however, said they were happy over the amount of recovery equivalent to the cost of fund.

"We don't bother about market prices or competitive prices while selling the land. We sold an industrial plot at Tongi at a price that was, by any measure, very low."

He hinted that it was sold to a close relative of a board member of the bank.

The BDBL now has ten members on its board, all nominated by the government, as the state holds the cent per cent stake in the bank.

He said: "The board is the highest authority. We have no say about acceptance of any quotation on land prices. It's all up to them."

The BDBL usually publishes notices to auction off land of the project concerning the loan defaulters under the Section 12 (3) of the Ortho Rin Adalot 2003.

Soon after publication of a notice, the defaulter usually files a case with the higher court seeking status quo on the auction.

Then, if the court rejects the appeal, the BDBL files a case with the Ortho Rin Adalat. The court normally hands down its verdict in favour of the bank.

A senior official at the law department said: "The court takes nearly 18 months to award the bank the title of a loan defaulter's project land."

The FE also interviewed officials of five land survey firms enlisted with the BDBL, who said they quote different rates for the land to be sold, including market prices with the latest valuation.

"I've never seen the bank to follow the market prices," said an official of one of the survey firms said.

He raised a question about integrity of the bank's debt department, involved in calculating the cost of fund.

However, BDBL Managing Director Dr Md Zillur Rahman declined to comment on the issue of selling land below the market prices and said the bank was performing well.

"Our performance in every aspect including non-performing loans is quite all right," Mr Rahman added.

The BDBL was incorporated as a limited company in November 2009, following a government decision to merge the BSB and the BSRS, two public sector development financing entities.

The BDBL launched its commercial operation in January 2010, and is involved in development financing, commercial banking and capital market operation.

News: The Daily Financial Express/Bangladesh/10-Nov-12