Tropical Bank Uganda Limited and its client, IT Office [U] Limited, are facing rising tensions and scrutiny after failing to repay a Shs 6.84 billion loan taken from Prime Finance Company Limited, owned by businessman Sudhir Ruparelia. The unpaid loan has now ballooned to over Shs 21 billion.
In March 2020, Prime Finance extended a Shs 5.7 billion loan to IT Office [U] Limited, with Tropical Bank providing a written guarantee to repay the loan if IT Office failed to meet its obligations.
Despite the repayment being due by July 2020, no payments have been made, leading to a rapid accumulation of debt.
Loan Backstory and Tropical Bank’s Involvement
The loan from Prime Finance was intended to clear IT Office’s outstanding liabilities with Tropical Bank, enabling IT Office to secure a larger loan.
However, after IT Office failed to repay, Tropical Bank has refused to settle the debt or transfer IT Office’s collateral to Prime Finance, citing claims of fraud.
Bank officials involved in the loan transaction have dismissed these allegations, stating that all procedures were followed correctly to benefit the bank.
Tropical Bank had guaranteed repayment with a 5% monthly interest, regardless of IT Office’s ability to repay. The funds were also crucial in helping the bank meet the Bank of Uganda’s recapitalization requirements.
Escalating Dispute
Despite reminders from Prime Finance, Tropical Bank has refused to cooperate. The bank initially sought intervention from the Bank of Uganda, alleging fraud in the transaction, but BoU advised Prime Finance to seek legal remedies.
As the standoff continues, the debt has grown significantly, placing both Tropical Bank and IT Office under increased financial and reputational pressure.
Following BoU advice, Prime Finance Company Limited, through its lawyer, would on December 4, 2022, file a suit against IT Office [U] and Tropical Bank Uganda, and on August 30, 2021, the court ruled in favour of Prime Finance Company Limited for recovery of Shs 6.84 billion, repayable at interest rate of 5 percent per month on the decretal sum till payment in full and costs in the main suit and application be borne by the respondents.
But since the ruling, no repayment has been made by Tropical Bank Uganda.
