Orion Pharma Ltd, a pharmaceutical subsidiary of Orion Group, has received a loan rescheduling facility for a forced/demand loan from state-run Agrani Bank, granted with special approval from the Bangladesh Bank.
Under usual circumstances, when a borrower fails to settle a payment for a letter of credit within the stipulated period, the corresponding amount converts into a forced or demand loan, as the bank is obliged to fulfil the obligation to foreign lenders.
According to a memorandum of understanding (MoU) signed in 2023 between Bangladesh Bank and Agrani Bank, the rescheduling of any forced or demand loan with a repayment extension of two years or more requires collateral equivalent to 100% of the loan amount.
The MoU was designed to mitigate risks in loan recovery and prevent the creation of risky assets, as stated by central bank officials.
Despite this, Agrani Bank rescheduled Orion Pharma's forced loan of Tk132.18 crore, a part of its total outstanding liabilities amounting to Tk1,039.45 crore, extending the repayment period by 6 years, even though the company faced a collateral shortfall of approximately Tk547 crore, as indicated by documents from the central bank.
In May, Bangladesh Bank sent a letter to Agrani Bank stating that the MoU's conditions would not apply to Orion Pharma due to its role in manufacturing, marketing, and exporting medicines, considering the public health implications.
However, the banking regulator imposed two conditions on Agrani Bank.
First, Orion Pharma must address the Tk547 crore collateral shortfall by 31 March 2025.
Second, Agrani Bank is required to provide updates to the central bank every three months regarding the status of the collateral collection.
When contacted, Bangladesh Bank Executive Director and Spoksperson Md Mezbaul Haque said the central bank occasionally grants special approvals for exemptions from rules and regulations based on recommendations from the finance ministry.
Such decisions are influenced by the specific circumstances, particularly when related to the power or pharmaceutical sectors, he noted.
An inspection conducted by the central bank at Agrani Bank in May revealed that the creation of the Tk132.18 crore demand loan had pushed Orion Pharma's total outstanding liabilities beyond the single borrower exposure limit established by the Bank Company Act.
The law stipulates that a bank cannot lend more than 25% of its paid-up capital to a single client.
Previously, Bangladesh Bank had instructed Agrani Bank to reduce Orion Pharma's total outstanding liabilities to within the single borrower exposure limit by the end of this year.
However, the inspection team found that the company’s loans had increased during the first five months of this year.
The inspection report highlighted that the central bank signs memorandums of understanding with state-run banks annually to improve their financial health and that the conditions outlined in these documents apply uniformly to all customers. It argued that exempting certain clients from the MoU conditions is illogical.
When approached for comments, Agrani Bank Managing Director and CEO Murshedul Kabir said the loan rescheduling facility was provided with approval from Bangladesh Bank.
He added that Orion Pharma's loan was rescheduled following an adequate down payment.
"We are not at fault for providing the facility," he asserted.
Central bank documents further revealed that Agrani Bank had sanctioned Tk 963 crore to Orion Pharma for the importation of machinery, a portion of which later converted into a forced loan.
As of April this year, Orion Pharma's total outstanding liabilities with Agrani Bank stood at Tk1,039.45 crore, according to the central bank's records.
Orion Group Managing Director Salman Obaidul Karim said Agrani Bank rescheduled the loan in compliance with the rules, and regulations, and with the permission of Bangladesh Bank.
He mentioned that the collateral previously provided did not include the assets of Orion Pharma Park, the company's manufacturing facility in Narayanganj, which was under expansion at the time.
"The expansion is now complete, and Orion Pharma Park has commenced its manufacturing processes," he said, adding that documents presenting Orion Pharma Park's assets as collateral will be submitted to the bank shortly, and these assets will suffice to cover the loan.
