The public life insurer Jiban Bima Corporation is paying the price for a lack of discernment. It has deposited its insurance clients’ premium money in banks and weak non-banking financial institutions and, as a foreseeable consequence, does not get it back even when the deposits mature.
To settle the maturing deposits, the company has written dozens of letters to the managing directors of the banks and financial institutions concerned, the governor of Bangladesh Bank and the Ministry of Finance, but has not yet received a response.
For example, Jiban Bima Corporation made fixed term investments of approximately Tk 40 crore in two deposit accounts with private sector First Finance Limited, which matured in February and April 2018, respectively. At the end of July 31 this year, the sum including principal plus interest was Tk 48.46 crore.
Since the expiry of the deposit requirements in 2018, the company has repeatedly asked the financial institution to cash out its funds, but to no avail. During these four years, the insurance company sent 38 letters of formal notice to First Finance.
In addition, the Financial Institutions Division sent a letter to the Governor of Bangladesh Bank, while the central bank sent two letters to the Managing Director of First Finance and another to the Secretary of the Financial Institutions Division to take action. so that First Finance reimburses the Jiban Bima funds.
On June 12 this year, the central bank sent another letter to the CEO of the financial institution to collect the deposits. Despite all these letters, First Finance could not honor Jiban Bima’s withdrawal request due to his fragile health, the insurance company’s managing director, Md Saiful Islam, told Bangladesh Bank.
The cash-strapped financial institution, listed on the capital market, is also unable to repay overdue retail term deposits.
Jiban Bima had also found himself struggling to cash out the seven matured fixed deposits of Tk109 crore he was keeping at Padma Bank, formerly known as Farmers Bank. The insurance company had written to the bank 31 times to settle its deposits that matured in 2018 after renewal at different times. But Padma Bank could not honor the requests.
Later, the bank, without financial capacity to repay its dues, placed a repayment plan with the state-owned Jiban Bima Corporation that it would settle the deposits, which amounted to Tk 125 crore plus the interest, in seven years from 2023, in parallel with the maintenance of the payment of interest at 6%. Jiban Bima accepted the proposal.
Speaking on why the insurance company agreed to the bank’s reimbursement plan last year, Zahurul Haque, then managing director of Jiban Bima Corporation, told The Business Standard: “We accepted the offer from Padma Bank as we consider it a better option at the moment to recover our deposits. . If we go to court for recovery, it will take longer.”
In the meantime, Jiban Bima asked Modhumoti Bank to cash his term deposits of Tk 3 crore just two days before the term expires on March 5, 2021. But the bank only paid the interest of one year on March 7 and repaid the principal on March 14 seven business days late.
In a letter to Bangladesh Bank, the managing director of Jiban Bima said that Modhumoti Bank was seven days behind in repayment of principal. Even though the company has written 10 times to the Motijheel branch of Modhumoti Bank, demanding Tk 40,274 in interest for these seven days, the bank has yet to pay the amount.
At the same time, Jiban Bima has his deposits blocked in ICB Islami Bank. The company does not receive any response from the bank even after sending formal notices at regular intervals.
Jiban Bima MD Saiful Islam told The Business Standard: “It’s people’s money. We invested it to make a profit and we’re supposed to get it back as soon as the tenure period expires. [banks and non-bank financial institutions] failed to repay the installments on time, putting Jiban Bima in trouble.”
Mentioning that the banks and non-bank financial institutions concerned are not responding to the company’s repeated requests to release its funds, he said: “We are trying to find ways to recover our deposits. Discussions are also ongoing.
Meanwhile, those concerned said that weak banks and financial institutions do not receive adequate deposits from ordinary depositors, which is why they tend to collect funds from government institutions.
Sometimes these financial institutions bribe senior officials of various government institutions by paying hefty commissions to secure large deposits, they observed, adding that as a result, deposits made with these weak banks and financial institutions often cannot be removed in time.
However, it is not yet known whether such a corruption incident took place in the cases of the Jiban Bima deposits.
Asked about this, Saiful Islam told TBS that the deposits in question were kept before he joined the company as managing director.
Jiban Bima officials were also unwilling to disclose information about the sums of money the company has deposited in different financial institutions.
But, according to Jiban Bima’s 2020 financial report, his deposits in various banks and non-banking financial institutions stood at around Tk 760 crore.