Standard Bank uneasy with its managing director over corruption charges

Standard Bank, another of the country's private commercial lenders, is now in an uneasy position as its Managing Director Habibur Rahman was found involved in loan corruption during his previous tenure at Union Bank, where he served as investment head and additional managing director.

Separate investigations by the Bangladesh Bank and Union Bank revealed his direct role in approving Tk2,607 crore in loans for paper-only companies, with S Alam Group identified as the ultimate beneficiary.

Habibur, as chairman of Union Bank's investment and risk management committee, recommended the loans between 2021 and 2022. These loans have since defaulted, contributing to the lender's collapse, according to the inquiry reports obtained by The Business Standard.

Union Bank, which is now undergoing a merger with four other struggling banks, wrote to the Anti-Corruption Commission (ACC) in June seeking a case against Habibur based on its internal investigation.

He also faces a separate corruption case filed by the ACC in January 2024 over the alleged embezzlement of Tk11 crore during his tenure as an assistant vice-president (AVP) at Mercantile Bank in 2000.

According to the final charge sheet, the bank's head office sanctioned Tk8 crore in loans to Patric Fashion by accepting government property as collateral. The loan was approved in collusion with the then managing director and several officials, including Habibur, with the intent to embezzle funds.

In February, the ACC issued an arrest warrant for Habibur in connection with the Mercantile Bank case, at a time when he was serving as managing director of Standard Bank.

Standard Bank in precarious position

Habibur Rahman, who resigned from Standard Bank in May 2024 over corruption allegations, was reinstated after the regime change on 5 August. 

Now, a segment of Standard Bank's board members is reluctant to continue with Habibur, whose corruption charges, they said, have eroded depositor confidence and tarnished the bank's reputation.

A director told TBS on condition of anonymity that the bank cannot remove a managing director without Bangladesh Bank's permission before the end of their tenure, according to recruitment guidelines.

"After the central bank reinstated him, Habibur became vindictive towards those directors and began sending letters to Bangladesh Bank alleging various irregularities," the director alleged.

"Habibur is now trying to push a renewal proposal through a segment of directors, excluding those who had previously sought his removal before. Soon after rejoining, he also fired or forced at least 100 employees to resign, creating unrest inside the bank," he added.

He has reportedly placed several senior officials from Union Bank, who were also implicated in Bangladesh Bank's investigations, into key positions, according to the report obtained by The Business Standard.

Habibur's history with Standard Bank

Soon after an ACC-issued arrest warrant in February 2024 over the Mercantile Bank embezzlement case, Habibur went into hiding. To protect reputation, Standard Bank's board granted him three months' leave.

Later, following Bangladesh Bank's instructions, the board moved to terminate him, but he resigned to avoid formal dismissal, according to board members. Bangladesh Bank cleared his resignation after conducting an exit interview and reviewing all corruption allegations.

Despite this, the central bank reinstated Habibur while he was already facing corruption charges at Mercantile Bank. He received appointment approval while out on bail against the arrest warrant. 

The approval letter noted the ACC case, stating the appointment would be automatically invalid if he were convicted.

Notably, when approving Habibur's appointment, Bangladesh Bank had rejected NRBC Bank's proposal to appoint Md Rabiul Islam as managing director, citing his name in the same ACC corruption case. Rabiul, who had served as assistant vice president at Mercantile Bank, had joined NRBC as deputy managing director in 2020.

Now, after two months after his reinstatement, Bangladesh Bank's December 2024 investigation into Union Bank found Habibur involved in loan corruption in collusion with S Alam Group.

Habibur was reinstated by a deputy governor of the central bank. The deputy governor who was in charge of reconstructing the board of corruption-riddled banks after the uprising allegedly instructed the board of Standard bank to reinstate him. 

That deputy governor was in charge of appointing the managing director and approved the appointment of Habibur in September 2024 withdrawing the previous resignation.

Arif Hossain Khan, executive director and spokesperson of Bangladesh Bank, said "An action will certainly be taken as the central bank itself prepared the investigation report."

He said all reports are sent to the regulation and policy department to initiate necessary measures.

He added that the central bank must follow a set process for both the appointment and removal of a bank's managing director, noting that the central bank never approves such proposals immediately to avoid any injustice.

What Habibur says

When asked about the corruption charges, Habibur Rahman said he signed loan documents against paper-based borrowers in Union Bank, fully aware that the ultimate beneficiary was only S Alam Group.

"However, I had no choice but to follow office orders, as the bank was completely controlled by S Alam Group while Bangladesh Bank, as regulator, remained silent. Ordinary bank employees like me had no safeguards under the previous regime," he added.

He questioned how a bank employee could dare to resist signing fictitious loan proposals when multiple banks were being forcefully taken over with the support of state mechanisms.

Habibur claimed that during his three-year tenure at Union Bank from 2021, he tried several times to resign after seeing the bank being looted, but his resignations were not accepted. 

"Eventually, I left Union Bank and joined Standard Bank," he said.

Regarding the Mercantile Bank embezzlement case, he described it as "merely a loan loss case." 

He insisted there was no intention to embezzle and that he did not benefit from a single penny. He said his name was not included when the case was initially filed, but later appeared on the final charge sheet as part of a conspiracy to remove him from Standard Bank.

"Bangladesh Bank is fully aware of my conduct, which is why they reinstated me as managing director of Standard Bank after the regime change," he added.