The Bangladesh Bank (BB) yesterday asked Jubo Karmasangsthan Society (Jubok), a non-government organisation, to return all its savings, deposits and other credits to its members and depositors by December 31 this year.
The central bank in a letter also asked Jubok to immediately stop collecting deposits from people in any form for the sake of public interest.
The BB also sent letters to the Finance Division and the Joint Stock Companies and Firms asking them to take necessary actions against the NGO for violating the laws.
"The Bangladesh Bank was under tremendous pressure while dealing with this case," said a top private bank official, adding that
almost all political parties came up with requests not to take any action against Jubok.
On May 24, the central bank served a notice on Jubok in accordance with sections 51 and 52 of the Banking Companies Act, 1991, asking it to explain within seven days why its activities such as collecting deposits and borrowing from common people on interests should not be declared illegal.
Yesterday's BB directive does not exercise the Banking Companies Act but was for the sake of public interest and financial discipline. Following the law, the BB was supposed to declare Jubok bankrupt and wrap up its all other business activities. The BB was also supposed to make a public announcement in the media about Jubok's illegal banking and ask
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people not to make any transaction withit.
The central bank officials argued that the BB gave Jubok an exit to return all the money to people it has collected from them.
Referring to the case of Islamic Trade and Commerce Ltd (ITCL), another NGO running similar banking, the official explained that its depositors did not get their money back as the action was taken according to the Banking Companies Act.
However, Jubok said it has received the central bank order and already taken necessary steps to implementit.
"We would like to inform all our members, well-wishers, officials and workers that we have already made announcement that Jubok will follow the BB directive. We are also committed to implement it giving top priority to the interest of the organisation and its members," Jubok said in a statement signed by its director Syed Rashedul Huda Chowdhury.
Commenting on the issue, Khondokar Ibrahim Khaled, managing director of Pubali Bank Ltd and former deputy governor of the central bank, appreciated the BB action as a primary step. "But the central bank should go toughif Jubok fails to adjustits transactions," he said.
Earlier, a BB investigation found that Jubok and its sister concern Jubo Karmasangsthan Udyog have been collecting deposits through deposit books from and disbursing loans to its members and common people. But, receiving money from common people through deposit books is similar to collecting deposits by banks.
Besides, Jubo Karmasangsthan Udyog has been receiving loans from common people in exchange of a very high interest rate through agreements on non-judicial stamps, a report of the investigation said.
It pointed out that according to the Societies Registration Act, 1860, the activities of the two organisations are like banking activities and not in compliance withits section 20 sub-clause.
The report also said such bankinglike activities are not only unethical but also risky for the members and clients of Jubok. If these activities cannot be stopped, Jubok's members and clients might face financial disasters, the report warned.
Sources said although Jubok started its operation in 1994 with only providing micro-credits to its members, it was registered with the Joint Stock Companies in 1997, and since then it has set up more than 20 business organisations.
It is now involved with businesses in telecommunications, housing and real estate development, tourism, health, ceramics, seafood, IT, pisciculture, nursery, agro-biotech industry, and capital management. The once small NGO has now become a big organisation with a capital of more than Tk 1,000 crore.
Two representatives of Jubok--Hossain Al Masum, chairman of Jubok Housing & Real Estate Development Ltd, and Sabih Ul Alam, director of Jubok Ceramic Industries Ltd--
recently joined the IFIC Bank as directors after purchasing a significant chunk of the bank's shares.
A BB investigation report earlier termed Jubok's collection of money from people "illegal banking". The organisation denied the allegation at a hearing before BB representatives.
The BB investigation report did not mention how much money Jubok had collected by then from its depositors. A Jubok report sent to the BB MicroFinance Research and Reference Unit said it had collected Tk 37.78 crore until December 31, 2005.
The real amount of deposit, however, is much higher, sources said, adding that Jubok has already removed many papers and documents fromits office.
The BB report said Jubok collected deposit promising benefits like a special bonus programme under which the depositor, be a Jubok member or not, can immediately draw a profit of Tk 20,000 after depositing Tk 1 lakh while the capital may be refunded after one year.