Bangladesh Bank Opens Tk 3,000 Crore Loan Route for Five Defaulting City Group Firms

Special exemption targets food production before Ramadan

Bangladesh Bank has cleared the way for five defaulting City Group companies to receive up to Tk 3,000 crore in fresh working capital, with eight banks initially committing Tk 1,700 crore. The exemption, issued on November 4, 2026, runs until December 31, 2027, and is intended to finance raw material imports for food production ahead of Ramadan.

City Bank is leading the financing, with Mutual Trust Bank acting as co-arranger. City Bank has committed Tk 300 crore, while seven other banks have committed Tk 200 crore each. The remaining Tk 1,300 crore is expected to come from additional lenders joining the syndicate.

The decision gives the companies access to new borrowing despite their default status. Bangladesh Bank used Section 121 of the Bank Company Act, 1991, to exempt the proposed financing from Section 27(KaKa)(3), which generally prohibits banks and financial institutions from extending fresh credit to borrowers classified as defaulters.

City Group, which markets food products under the Teer brand, already owes about Tk 26,000 crore across a broad network of lenders. The new facility is tied to fresh collateral, bank supervision of imported materials and a designated account through which sales receipts must pass before participating lenders receive repayments.

Bankers expected the initial loan agreement to be signed on November 5, with disbursement scheduled to begin on November 8 according to the companies' needs. Those dates describe the planned rollout; confirmation that the agreement had been signed or money released was not given.

For households, the immediate issue is whether financing keeps edible oil, sugar, lentils and flour moving through factories and into shops before Ramadan. For banks, the task is to fund those operations while recovering money from a group already struggling with substantial debt.

Which companies can borrow?

The exemption covers five named businesses within City Group rather than every company belonging to the conglomerate. All five beneficiaries are classified as defaulters:

• City Seed Crushing Industries Ltd.
• City Sugar Industries Ltd.
• City Edible Oil Ltd.
• City Dal Mills Ltd.
• Shampa Flour Mills Ltd.

Bangladesh Bank has said the special arrangement is intended to keep viable businesses within the group operating and will not apply automatically to other borrowers. Its Banking Regulation and Policy Department-02 issued the circular, copies of which were sent to the chief executives of scheduled banks.

Working capital means money used for everyday business needs, such as purchasing raw materials and paying production costs before customers pay for finished goods. Here, the financing is directed at imported inputs that the five companies can process and sell.

The facility therefore focuses on the operating cycle: import materials, make food products, sell them and use the proceeds to repay lenders. The separate question of how City Group will repay its much larger stock of existing debt is being addressed through discussions about restructuring, rescheduling and asset sales.

How the banks will assemble the money

City Bank's Tk 300 crore commitment and seven commitments of Tk 200 crore bring the first phase to Tk 1,700 crore. The seven banks are Dutch-Bangla Bank, Mutual Trust Bank, NCC Bank, Prime Bank, Pubali Bank, Southeast Bank and Trust Bank.

The initial commitments cover about 57% of the Tk 3,000 crore target, leaving about 43% still to be assembled. The facility grew by Tk 1,300 crore from the earlier plan of Tk 1,700 crore, an increase of roughly 76%.

A syndicated loan allows several banks to finance the same borrower under a shared arrangement. Each bank contributes an agreed amount, spreading the financing across several balance sheets instead of requiring a single lender to provide the entire sum.

City Bank Managing Director and Chief Executive Mashrur Arefin confirmed the initial contributions and said the arrangers expected more banks to join. Earlier discussions, described on October 27, were still awaiting approval from at least one participating bank's board. The November commitments represent a later stage in that process.

Shamilito Islami Bank has separately approved a Tk 1,600 crore facility for City Group, according to an official at a bank involved in the syndicate. That lender was formed through the merger of five troubled Islamic banks. Its facility was described as separate from the Tk 3,000 crore syndicate.

Why the lenders are focusing on Ramadan

Mashrur Arefin said the financing was urgent because City Group supplies essential foods, including edible oil, sugar, lentils and flour. Importers need to secure raw materials before the expected rise in demand around Ramadan 2027.

Arefin, speaking as City Bank's managing director, explained the purpose of the exemption:

"With demand expected to peak before and during Ramadan in 2027, Bangladesh Bank granted a special exemption. This allows the facility to finance raw material imports and keep production running without interruption," he said.

Arefin said keeping the factories operating would help protect food security and stabilise essential commodity prices. The practical aim is to prevent a shortage of financing from interrupting imports and production at a large food supplier.

For City Group, access to credit also affects its ability to arrange letters of credit. A letter of credit is a bank's promise to pay an overseas supplier once specified trading conditions are met. Earlier discussions included requests for regulatory support to keep those import arrangements functioning.

The financing connects a banking problem with a supply problem. Factories need materials before they can generate sales, while lenders need those sales to produce repayments. The arrangement attempts to keep that cycle running under closer bank control.

Fresh collateral and control over goods

Bangladesh Bank's conditions require City Group to provide property that is free from claims arising from other loans or liabilities. The property must be pledged through registered mortgages, giving lenders a formal claim against it as security.

Unencumbered property is an asset that has not already been pledged to another creditor. This requirement matters because the new lenders need identifiable security for their financing, rather than relying on assets already committed elsewhere.

The arrangement also places imported materials and the products made from them under lender supervision. The borrowing companies are to purchase imported raw materials as representatives of the lenders' security agent and process them as custodians.

A security agent manages collateral on behalf of all participating lenders. Acting as a custodian means the companies hold and process the materials within the agreed financing arrangement, with banks monitoring the goods and the money associated with them.

Earlier planning required City Group to submit a complete list of its movable and immovable assets. The new financing consequently depends on both the availability of suitable property and the ability to track materials from import through processing and sale.

Sales receipts must flow back to lenders

Revenue from selling goods bought with the syndicated financing must be deposited into a designated bank account. Participating lenders are to receive regular repayments from that account on a priority basis, in proportion to their financing shares.

The designated account gives banks a direct way to collect from the business activity they are financing. Instead of allowing those receipts to circulate freely across the group, the arrangement directs them toward repayment of the new facility.

Earlier discussions described an escrow account, meaning an account whose use is controlled by agreed conditions. Under that proposal, banks providing the fresh financing would receive money from the new business cycle, while other lenders would not have direct access to those receipts.

Bangladesh Bank has also placed responsibility for the loans on the participating lenders. Neither the government nor the central bank will bear financial liability, and the banks cannot seek financial assistance from either because of this facility.

The central bank is granting permission to lend, while the banks must assess the collateral, supervise the financing and collect repayments. Their recovery will depend on the companies turning imported materials into sales and keeping the resulting cash within the agreed account structure.

A large debt burden sits behind the rescue

City Group's existing borrowing is spread across dozens of institutions. The debt has been described as more than Tk 26,000 crore owed to 43 banks; a broader count covering domestic and foreign banks and other financial institutions puts the lender network at 48. Several lenders have already classified their loans to the group as defaulted.

A March snapshot recorded Tk 24,185 crore in exposure across 47 banks and financial institutions. Of that amount, Tk 16,246 crore was funded exposure and Tk 7,939 crore was nonfunded exposure.

Funded exposure generally means money a lender has already advanced. Nonfunded exposure includes commitments such as letters of credit or guarantees, under which a bank may have to make a payment. In the March figures, about two thirds of the exposure was funded and one third was nonfunded.

City Group had earlier sought to reschedule about Tk 26,000 crore over 12 years and requested another Tk 6,000 crore in working capital. Rescheduling changes the repayment timetable, while restructuring can involve broader changes to a loan's terms.

The new Tk 3,000 crore facility is half the group's earlier working capital request. Discussions also included selling assets over the following two to three years to repay existing borrowing, alongside possible longer term restructuring.

How the exemption developed

Bangladesh Bank's November decision followed months of debate over how lenders should classify City Group's loans and whether to supply more credit. Banks had different views about the treatment of overdue borrowing.

A June 30 permission had allowed existing loan classifications to remain unchanged through September 30. Lenders later sought permission to keep loans unclassified until June 30, 2027, as part of efforts to maintain operations and improve recovery prospects.

The main steps were:

• June 30, 2026: Bangladesh Bank allowed City Group's existing loan classifications to remain in place until September 30.
• Late October: Governor Mostaqur Rahman met lending bank executives and City Group Managing Director Md Hasan to discuss fresh financing and possible restructuring.
• October 27: The proposed syndicate financing stood at Tk 1,700 crore, with approvals still being pursued.
• November 4: Bangladesh Bank issued the special legal exemption for the five companies.
• November 5 and November 8: Bankers expected agreement signing and the start of disbursement, respectively.
• December 31, 2027: The exemption from the restriction on fresh lending expires.

The late October meeting is dated October 25 in several accounts and October 26 in another description of the same discussions. Participants considered delaying default classification, providing new operating funds and allowing longer term restructuring or rescheduling.

The exemption's December 2027 expiry concerns permission to extend this financing. The loan's repayment term, interest rate and detailed instalment schedule were not specified.

Profit, idle factories and competing explanations

City Group's audited financial statements show net profit of Tk 946 crore and sales of Tk 32,876 crore in the 2024-25 financial year. That works out to a net profit margin of about 2.9%, meaning roughly Tk 2.90 in profit for every Tk 100 of sales.

A profitable business can still struggle to make loan payments because accounting profit and available cash are different. Cash may be tied up in factories, inventories or unpaid customer bills, while debt instalments and import payments fall due on fixed dates.

City Group attributes its difficulties to investments of Tk 12,000 crore in factories at Hoshendi Economic Zone in Gazaria, Munshiganj. The group says those factories could not begin operating because they did not receive gas.

Mutual Trust Bank Managing Director Syed Mahbubur Rahman offered a broader explanation, pointing to mistaken decisions and investments outside the group's main businesses. Senior bankers have also called for closer examination of the causes of the crisis.

The fresh facility is directed at the five food businesses, while the wider recovery discussions concern the group's investment decisions, idle assets and accumulated borrowing. Successful imports and sales would generate money for the participating lenders; repayment of older debts will also depend on the restructuring and asset disposal plans.

Key Points

• Bangladesh Bank issued a special exemption on November 4, 2026, allowing fresh working capital financing for five defaulting City Group companies.
• The proposed facility is Tk 3,000 crore, with eight banks initially committing Tk 1,700 crore.
• City Bank committed Tk 300 crore, and seven other banks committed Tk 200 crore each.
• The money is intended to fund raw material imports and food production ahead of Ramadan 2027.
• City Group must provide fresh mortgage security, while sales receipts must enter a designated account for lender repayments.
• The government and Bangladesh Bank will bear no financial liability for the facility.
• The legal exemption expires on December 31, 2027.