Why City Group Facing Its Biggest Financial Crisis in 56 Years?

City Group, one of Bangladesh's largest conglomerates and the company behind leading consumer brands including Teer, Natural, Jibon, Sun and Quick Bite, is seeking regulatory support from the central bank after warning of mounting financial stress that could push parts of its business into loan default.

The group, which has operated for 56 years, has asked Bangladesh Bank to provide policy support and requested that its loans with banks and financial institutions not be classified as defaulted while it works through its financial challenges.

City Group is one of the country's largest suppliers of essential consumer goods. According to industry estimates, the conglomerate accounts for approximately:

• 40% of Bangladesh's sugar supply
• 35% of the edible oil market
• 25% of the country's wheat demand

The group operates around 40 companies, employs approximately 25,000 people directly and has expanded into economic zone development and the media sector.

Although City Group did not respond to requests for comment, a letter sent to the governor of Bangladesh Bank cited several factors behind its financial difficulties.

The company said the sharp rise in the U.S. dollar exchange rate over the past few years has significantly reduced its ability to finance imports. It also stated that newly established factories have been unable to begin full production because they did not receive the promised energy supply.

Financial analysts argue that the challenges extend beyond operational issues and also reflect weaknesses in banks' lending practices.

Former Bangladesh Institute of Bank Management (BIBM) Director General Dr. Toufic Ahmad Choudhury said many commercial banks increased their exposure to City Group after seeing other lenders provide large financing facilities.

He warned that excessive lending concentration to a single corporate group can create systemic risks for the banking sector if that borrower encounters financial distress.

A consortium of 36 banks has begun restructuring approximately BDT 260 billion (26,000 crore taka) in loans extended to City Group.

Bangladesh Bank has also instructed lenders not to classify the group's loans as non-performing until September, giving the company additional time to stabilize its financial position.

Bangladesh Bank spokesperson Arif Hossain Khan said that when a major industrial group faces financial stress for legitimate reasons, the central bank may provide policy support within the limits of existing laws.

He cautioned that financial difficulties at a large corporate borrower could have broader implications for Bangladesh's economy and banking sector.

Former Social Islami Bank Managing Director Shafiqur Rahman expressed doubts about the restructuring effort's long-term success.

Drawing on past experience, he said coordinated rescue efforts involving multiple banks have often struggled to recover large corporate loans, raising questions about whether the current initiative will achieve its objectives.

Market experts say the situation highlights Bangladesh's heavy reliance on bank financing for large industrial investments. They argue that developing a stronger capital market would provide companies with greater access to long-term funding while reducing systemic risks within the banking sector.