City Bank Leads a Tk3,000 Crore Syndicate to Keep City Group's Edible Oil and Sugar Mills Running

Bangladesh Bank has cleared the way for eight banks to lend Tk3,000 crore to five companies that are, on paper, already loan defaulters. A notification issued on November 4 waives Section 27(KaKa)(3) of the Bank Company Act, 1991, the rule that normally bars banks from lending fresh money to a borrower already classified as a defaulter. The waiver, granted under the central bank's special powers in Section 121 of the Act, runs until December 31, 2027, and applies specifically to City Seed Crushing Industries Ltd, City Sugar Industries Ltd, City Edible Oil Ltd, City Dal Mills Ltd and Shampa Flour Mills Ltd, all units of the City Group conglomerate.

• Bangladesh Bank waived a key default rule so banks can lend fresh working capital to five City Group units already classified as defaulters.
• Eight banks have committed Tk1,700 crore so far toward a planned Tk3,000 crore syndicated facility, led by City Bank with Mutual Trust Bank as co-arranger.
• Separately, Shamilito Islami Bank has approved its own Tk1,600 crore facility for the group, according to an official at a participating bank.
• City Group owes roughly Tk26,000 crore to 48 lenders, and the new financing is meant to secure raw material imports ahead of Ramadan 2027.

What the exemption actually allows

Under ordinary rules, a bank cannot extend new credit to a company that has already been marked as a loan defaulter, since doing so would, in effect, be throwing good money after bad. The November 4 notification carves out a specific exception for City Group's food-processing units, letting lenders treat this new facility as separate from the group's existing troubled debt. City Bank Managing Director Mashrur Arefin, who is arranging the facility, said the move reflects the companies' importance to the food supply chain, given their role in edible oil, sugar, lentils and flour.

"We need to stand by our customers not only when everything is going well but also when they face dire challenges," Arefin said.

How the money is structured

The facility is being built in phases. So far, eight banks have committed Tk1,700 crore: City Bank itself has put in Tk300 crore, while Dutch-Bangla Bank, Mutual Trust Bank, NCC Bank, Prime Bank, Pubali Bank, Southeast Bank and Trust Bank have each committed Tk200 crore. Arefin said the arrangers expect the remaining roughly Tk1,300 crore to come from additional banks joining the syndicate in the coming weeks, bringing the total to Tk3,000 crore.

Bank	Phase 1 commitment
City Bank (lead arranger)	Tk300 crore
Dutch-Bangla Bank	Tk200 crore
Mutual Trust Bank (co-arranger)	Tk200 crore
NCC Bank	Tk200 crore
Prime Bank	Tk200 crore
Pubali Bank	Tk200 crore
Southeast Bank	Tk200 crore
Trust Bank	Tk200 crore

This new facility sits alongside, not instead of, an earlier Tk1,700 crore rescue loan the central bank cleared for City Group in late October, and a separate Tk1,600 crore facility that Shamilito Islami Bank has approved on its own. Taken together, the group now has several parallel lending lines designed to keep its edible oil, sugar, lentil and flour operations supplied with raw material even as its overall debt position remains deeply strained.

The safeguards lenders built in

The structure is designed to protect the lending banks, not to erase City Group's existing debt. Neither the government nor Bangladesh Bank bears any liability for the new loans, and City Bank and the other syndicate members have agreed they cannot seek financial support from either institution in the future over this facility. The five companies must pledge unencumbered assets, meaning property not already mortgaged against other debts, through formal registered mortgages. Perhaps most importantly, any sales revenue earned from goods bought with this financing must flow into a designated bank account, from which lenders are repaid first, in proportion to their share of the facility, before the companies can use the cash for anything else. The five companies effectively buy and process the imported raw materials as custodians acting on behalf of the lenders' security agent, rather than as free agents with their own cash.

"This is the first step to ensure this business house thrives again," Arefin said of the facility.

City Group's total exposure to the banking system is substantial. The conglomerate owes about Tk26,000 crore to 48 domestic and foreign banks and financial institutions, and some of that debt is already classified as defaulted, which is precisely why the November 4 waiver was necessary before any bank could extend new money. The timing points to Ramadan 2027, still more than a year away, as the real driver: edible oil, sugar and lentils are staple Ramadan imports, and lenders appear to be betting that keeping the group's import pipeline open is less risky than letting a major food supplier collapse.

What it means for you

For ordinary consumers, the immediate effect should be continuity of supply. City Group is one of the country's larger importers and processors of edible oil, sugar, lentils and flour, all staples in Bangladeshi kitchens, and a disruption to its operations could have shown up quickly in retail prices for cooking oil or sugar. Keeping the raw material pipeline funded through next year's Ramadan season is, in that sense, a consumer protection measure as much as a banking one.

For bank depositors and investors, the episode is a reminder that regulatory exemptions for large, politically significant borrowers are becoming a recurring feature of Bangladesh's banking landscape rather than a one-off event. If you hold savings or fixed deposits, it is worth keeping an eye on which banks are repeatedly stepping up for these syndicated rescue facilities, since large exposures to a single, financially stressed conglomerate add a layer of concentration risk even when, as here, the loans are structured with asset pledges and priority repayment. You can track how different banks' FDR rates compare using the site's FDR rate comparison tool if you are deciding where to place new savings.

What to watch next

The key number to track is how much of the remaining Tk1,300 crore gets filled, and by which banks, in the coming weeks. It is also worth watching whether Bangladesh Bank extends similar default exemptions to other distressed conglomerates once this structure is seen to work, since City Group is far from the only large borrower straining under heavy debt. For now, the arrangement buys City Group's food-processing units breathing room, while keeping the group's lenders first in line for repayment if the bet pays off.