Shame! Tropical Bank’s Dirty Scandals Exposed As Bosses Sweat To Bury Ruparelia’s Loan

By Spy Uganda

Tropical Bank Uganda Limited and IT Office [U] Limited are embroiled in a financial controversy after failing to settle a loan of over Shs 6.84 billion owed to Prime Finance Company Limited, despite a court order mandating repayment. This debt, which has now surged to more than Shs 21 billion due to accumulated interest, stems from a loan arrangement that began in March 2020.

On March 13, 2020, Prime Finance Company Limited extended a loan of Shs 5.7 billion to IT Office [U] Limited at an agreed interest rate of 5 percent per month, to be repaid within four months. Tropical Bank Uganda, the official banker for IT Office [U] Limited, agreed in writing to cover the debt if IT Office [U] Limited defaulted. Despite this agreement, over four years have passed without any payments being made, leading to a significant increase in the outstanding debt.

The trouble began when IT Office [U] Limited approached Prime Finance Company for the loan in early 2020, with Tropical Bank issuing an irrevocable undertaking to ensure repayment of the loan principal and interest. The purpose of the loan was reportedly to settle IT Office [U] Limited’s existing liabilities to Tropical Bank, which exceeded Shs 5.7 billion, thereby facilitating the company to secure a larger loan from the bank.

However, despite the formal agreement, Tropical Bank Uganda has been reluctant to honor its commitment to Prime Finance Company, neither repaying the loan nor transferring IT Office [U] Limited’s collateral to the lender. The bank has instead claimed that the loan transaction was fraudulent, an allegation dismissed by senior bank officials who handled the paperwork, including the Executive Director, Head of Credit, and Legal Manager. These officials assert that they acted within the bank’s internal procedures and affixed the official bank seal to the irrevocable undertaking, which they claim was in the bank’s best interest.

Under the terms of the irrevocable undertaking, Tropical Bank guaranteed repayment of the loan, along with a 5 percent monthly interest, regardless of IT Office [U] Limited’s ability to pay. The loan from Prime Finance also reportedly played a crucial role in helping the bank meet the capital requirements set by the Bank of Uganda (BoU), as IT Office [U] Limited used it to secure an additional Shs 10 billion from Tropical Bank. This loan was backed by collateral, including land and a motor vehicle.

Despite benefiting from the funds, Tropical Bank has continued to stall repayment efforts. In a bid to evade responsibility, the bank even approached the Bank of Uganda, claiming that the loan was obtained fraudulently. However, BoU advised Prime Finance Company to seek recourse under the Contract Act of 2010, acknowledging that Tropical Bank had provided an irrevocable guarantee at the time of signing the agreement.

Following BoU’s advice, Prime Finance Company took legal action in December 2022, filing a suit against IT Office [U] Limited and Tropical Bank Uganda. In August 2021, the court ruled in favor of Prime Finance, ordering the repayment of Shs 6.84 billion, with an interest rate of 5 percent per month on the unpaid amount. However, Tropical Bank Uganda has yet to comply with the court’s ruling.

Internal documents reveal that Tropical Bank’s Board of Directors is now attempting to distance itself from the loan transaction, arguing that senior bank staff lacked authorization to enter into the agreement. This move has raised suspicions that the bank may be attempting to evade its financial obligations to Prime Finance Company, possibly under the influence of the bank’s current Executive Director, who was overseeing the Recovery Department at the time the loan was arranged.