A competent banker’s core role is to safeguard financial security, give clients sound advice and drive the bank’s commercial growth. Modern banking fuses financial analysis with customer service, casting the banker as a partner in economic development. Even the most skilled bankers, however, failed this duty when it came to City Group, one of Bangladesh’s leading industrial conglomerates.

The warning signs of a crippling energy shortage, including a scarcity of gas supply, were visible nearly a decade ago. With domestic gas unable to sustain the country’s industries, the government began importing liquefied natural gas (LNG) in April 2018. Petrobangla had already been failing for years to provide new gas connections to factories and plants. Yet City Group, without securing any gas supply commitment, went ahead and built six major industrial units simultaneously after 2020. It invested roughly BDT 140 billion. The plants, sited in the Hoshendi Economic Zone in Munshiganj’s Gajaria, are what ultimately imperilled the group.

Banks, for their part, extended hundreds of billions of taka in loans purely on the strength of the group’s reputation, sidestepping any serious risk review. Top banks and senior executives widely regarded as the country’s finest bankers led the lending push.

Bangladesh Bank data and disclosures from the financing banks show City Group’s total outstanding loans stood at BDT 247.74 billion at the end of April 2026. The group borrowed from 48 domestic and foreign banks and financial institutions. Multinational lenders HSBC and Standard Chartered rank among the largest creditors. The country’s best private-sector banks also moved aggressively to lend. The list includes City Bank, Eastern Bank, Prime Bank, BRAC Bank, Mutual Trust Bank (MTB), UCB, Dutch-Bangla Bank, Pubali Bank and Bank Asia. The bankers who run these institutions routinely collect plaudits as the nation’s finest.

Among them, HSBC Bangladesh is led by Md Mahbub ur Rahman, the first Bangladeshi to head the multinational lender — a role he has held since March 2020. Naser Ejaz Bijoy ran Standard Chartered Bangladesh for nine straight years from 2017 before stepping down recently.

Mashrur Arefin has served as managing director and CEO of City Bank PLC since 2019. Ali Reza Iftekhar spent 18 years at the helm of Eastern Bank, retiring this year. Another veteran, Selim RF Hussain, led BRAC Bank for a decade from 2015 before resigning last year. Hassan O Rashid, who took charge of Prime Bank after 2021, recently joined Eastern Bank as the managing director. Among the country’s most senior chief executives, Syed Mahbubur Rahman has led Mutual Trust Bank since 2019, with previous stints as head of BRAC Bank and Dhaka Bank.

The failure to secure gas connections for its newly built plants has plunged City Group into an acute crisis despite the enormous investment. Its repayment capacity has withered, driving the group to apply for policy support from the central bank — a first in its 50-year history. Top executives of the financing banks and financial institutions have united to find a solution. On June 18, they met jointly with City Group’s policymakers and formed a committee to restructure the group’s debt.

The executives argue that banks lent purely on the strength of the group’s longstanding image. A default, they say, would imperil all 48 domestic and foreign lenders, including global development partners such as the Asian Development Bank and the International Finance Corporation. A bank whose non-performing loan ratio currently hovers around 2 percent would see it surge to 5–7 percent if City Group’s loans sour. The banks therefore want to stand by the group in their own self-interest. Bangladesh Bank has also reportedly given its nod to the matter.

Senior executives and deputy managing directors at several banks say a handful of first-tier banks showed excessive zeal in extending credit to City Group after 2020. They lent without weighing the risk of energy insecurity. Loans were underwritten against the group’s name, not against genuine investment prospects. Led by the top names, smaller banks and financial institutions followed the same path. The group itself, by building too many plants at once, has now entangled its lenders in the crisis.

HSBC carries the largest exposure to City Group at BDT 22.62 billion, followed by Standard Chartered with BDT 20.72 billion. Both multinational banks are now in a tight spot over City Group’s loans. Their non-performing loan ratios are currently negligible, but a default by City Group would cause those figures to spike.

Beyond the two global banks, Commercial Bank of Ceylon holds BDT 4.65 billion in City Group debt. Bank Alfalah has BDT 840 million, Habib Bank BDT 350 million and Woori Bank BDT 290 million. Among international development lenders, the ADB is owed BDT 1.13 billion, the IFC BDT 1.01 billion and the ICD BDT 3.03 billion.

The crisis has stirred unease inside these foreign banks’ local operations. Sources indicate the regional offices of global giants such as HSBC and Standard Chartered are worried about recovery prospects. Naser Ejaz Bijoy recently stepped down as CEO of Standard Chartered Bangladesh after nearly nine years, having taken charge in 2017.

Md Enamul Huque, now serving as interim CEO of Standard Chartered Bangladesh, told Bonik Barta when asked about the City Group loans: “We’ve maintained a business relationship with City Group since 1995 and have long regarded it as a valued client. The group ran into difficulties after 2022 due to losses stemming from exchange-rate movements and following the death of its founder, Fazlur Rahman. It also faced a range of broader challenges. We’re currently reviewing the group’s loans.”

Among domestic private-sector banks, City Bank PLC carries the largest exposure to City Group, with outstanding loans of BDT 16.79 billion at end-April. UCB holds BDT 15.79 billion, Eastern Bank BDT 14.07 billion, BRAC Bank BDT 10.70 billion and Prime Bank BDT 10.30 billion. All five are routinely ranked among the country’s best banks, and their chief executives enjoy reputations as its finest bankers.

Mashrur Arefin has led City Bank for more than seven years and chairs the Association of Bankers, Bangladesh (ABB). When Bonik Barta asked him about the City Group loans, he said the conglomerate’s predicament ought to be viewed not as one institution’s crisis but as a broader corporate and economic challenge. “City Group, one of the country’s largest industrial conglomerates, has relationships with 47 banks and financial institutions, an annual turnover of around BDT 320 billion and a workforce of 25,000. This matters for the entire economy and the financial system, not just for a single entity.”

On why so many banks financed City Group at once, Arefin rejected any suggestion of a structural failure in Bangladesh’s banking model. “In the reality of our financial sector, banks have long funded long-term industrial and infrastructure investments that, in an ideal world, would rely heavily on a deep capital market. That market has not developed, so banks have had to fill the gap. Now 36 commercial banks are working collectively to restore the group’s business, preserve jobs and keep essential supply chains running. This experience has made it clear we need to strengthen group exposure management, cash flow analysis, early warning systems and interbank coordination. With all stakeholders’ cooperation, I’m hopeful of a successful resolution and business recovery.”

The City Bank chief said he had spotted the danger early. “I could sense it. Big projects are underway but those weren’t generating revenue — it was obvious that spelled trouble.”

Tareq Refat Ullah Khan, managing director and CEO of BRAC Bank, said: “Banks must carry out a full and impartial assessment of every loan proposal according to their approved credit and prudent risk management policies. A borrower’s creditworthiness should be determined not by past relationship, reputation or long acquaintance, but by current financial strength, ability to generate cash flow, quality of governance, the sector’s future prospects and overall risk. Large corporate groups also bear a crucial responsibility to disclose complete, accurate and timely information about their financial position, business performance, contingent liabilities and emerging risks. Transparency and honesty in disclosure are essential for sound credit decisions and a sustainable banking relationship.”

Beyond the top five private lenders, City Group’s creditor list extends deep into the banking sector. Mutual Trust Bank is owed BDT 9.64 billion. Dutch-Bangla Bank BDT 9.46 billion, Pubali Bank BDT 9.13 billion, Bank Asia BDT 9.08 billion, Southeast Bank BDT 8.18 billion, One Bank BDT 7.43 billion, NCC Bank BDT 7.33 billion, Dhaka Bank BDT 7.04 billion, Mercantile Bank BDT 6.96 billion, Islami Bank Bangladesh BDT 6.49 billion, Al-Arafah Islami Bank BDT 6.22 billion, Trust Bank BDT 5.9 billion, Standard Bank BDT 4.83 billion, Meghna Bank BDT 2.32 billion and Uttara Bank BDT 2.06 billion. Further down the scale, Shahjalal Islami Bank is owed BDT 1.86 billion, Midland Bank BDT 1.67 billion, Sonali Bank BDT 1 billion, Community Bank BDT 960 million, NRB Bank BDT 750 million, Bengal Commercial Bank BDT 730 million, Shimanto Bank BDT 680 million, Rupali Bank BDT 510 million, Citizens Bank BDT 470 million, NRBC Bank BDT 450 million and Exim Bank is owed BDT 320 million.

Among non-bank financial institutions, IDLC holds BDT 4.94 billion in exposure, the largest. IDCOL is owed BDT 2.68 billion, BIFFL BDT 2.1 billion, IPDC BDT 1.5 billion, LankaBangla Finance BDT 1.19 billion, SABINCO BDT 800 million, Alliance Finance BDT 450 million and United Finance BDT 340 million.

Syed Mahbubur Rahman, managing director of MTB, links the debacle to a previous government’s failure to deliver promised infrastructure. “We as bankers prioritise financing industries inside economic zones. We assume they will receive gas and power connections first. But the previous government merely issued licences for economic zones in name. It collected money for connections and did nothing. That’s a far bigger failure from the previous government than any misjudgement by entrepreneurs or bankers.”

He added: “We can admit we probably lent too much to City Group. So many banks need not have lent all at once. The group, equally, could have refrained from building so many plants simultaneously. But we must also recognise that there are very few bankable companies in this country. 62 banks and 34 financial institutions are competing in a small economy.”

City Group is one of the top conglomerates in Bangladesh’s consumer goods market. Its founder, Fazlur Rahman, passed away in December 2023. Across banking and corporate circles he was widely respected for his drive and his readiness to honour commitments. Industry figures often recall his contribution to the country’s industrialisation. Over five post-independence decades, he built more than 40 enterprises spanning edible-oil and sugar refining, rice and pulses, flour, processed foods, poultry feed, shipbuilding, tea, banking, insurance and hospitals. The group also controls three economic zones and a hi-tech park.

Bonik Barta reported on May 6 that City Group had asked Bangladesh Bank for policy support to relieve mounting financial strain. The report said the group — long regarded as one of the country’s most dependable borrowers — had seen its capacity to service debt hollowed out by a series of global and domestic shocks. It sought seven forms of relief, including a moratorium on loan classification until September.

In its letter to the central bank governor, City Group stressed that its companies had never defaulted across more than 50 continuous years. No instalment had ever been delayed. Over the past four years, however, external and internal pressures had subjected the group to intense financial and operational stress, eroding its cash flow and repayment ability. That, the letter said, forced the group to turn to the central bank.

The letter also laid out City Group’s market dominance. Through household brands such as Teer, Sun and Natural, it supplies roughly 35 percent of the country’s edible oil, 40 percent of its sugar and 25 percent of its flour, helping steady prices through a sprawling supplier and distributor network. Annual turnover stands at around BDT 320 billion. The group directly employs some 25,000 people and sustains a wide ecosystem of farmers, suppliers and small traders. More than 1,500 suppliers, 3,500 distributors and over a million retailers and wholesalers depend on the group.

City Group Managing Director Md Hasan told Bonik Barta the group had met the chief executives of its lending banks on June 18. A committee was formed to review the situation and recommend steps. “We’re advancing some work based on that review,” he said.

Asked whether building so many industrial plants at once in the Hoshendi Economic Zone and borrowing heavily from dozens of banks had been a misjudgement, Hasan argued there was no genuine alternative to bank finance in Bangladesh. “There are few alternatives to bank financing in Bangladesh. In most countries, entrepreneurs raise funds through the capital market to finance investment, but opportunities to do so remain extremely limited in our capital market,” he said.

The managing director added: “Banks are also subject to restrictions on lending to a single borrower. That’s why the group couldn’t secure larger amounts of financing from any one bank even if it had wanted to. The situation after August 5, 2024 further weakened banks’ capacity to lend. Volatility in the dollar exchange rate, higher interest rates and the failure to secure a gas connection for the Hoshendi Economic Zone have all contributed to City Group’s current predicament.”