Formanul Islam's rejoinder and our reply

Formanul Islam, former Executive Director and CEO of Bangladesh Infrastructure Finance Fund Limited (BIFFL) issued a rejoinder to a TBS report titled "How a state-funded PPP lender wasted public money in wrong investments" published on 1 October 2024. 

Following are the points raised in the rejoinder and our reply.

"However, the company wasted its funds by investing in Fixed Deposit Receipts (FDRs) with weak banks and financial institutions. It also provided loans to some companies unrelated to PPPs which went defaulted causing loss of public money of nearly Tk1,800 crore."

Formanul's claim: FDR is not an investment. By very definition, it is a deposit. Not a single taka has yet been lost. No bank or NBFI has denied the existence of FDRs and most have repaid principal and interest. Interest is also accruing on all FDRs. The reporter should have reported how much of FDR and interest thereon has been recovered since July 2019. BIFFL is a full-fledged financial institution. It does not enjoy any exemption in terms of investment i.e. single borrower exposure limit, sector-specific investments, green financing, poverty alleviation financing etc. All the loans were made as per provisions of BIFFL's Credit Policy and with due approval from the Credit Committee of the Board and the Board of Directors itself. Even if both figures produced in two tables of the report are put together, it will not be 1,800 crore. This is nothing but an intentional blunder.

Our reply: FDR is also an investment, that's why any bank and NBFI makes financial analysis about the return and security of the money before placing deposits with other financial institutions. If FDR turns overdue, investor banks or NBFIs have to maintain provisions against it and keep interests suspended.

In the case of BIFFL, it had to maintain a Tk300 crore provision against overdue FDR of Tk650 crore and another Tk300 crore provision maintained against default loans of Tk500 crore, causing a total financial loss of nearly Tk1,800 crore for the company, according to company statement as of August 2024. All those investments were made during 2015 and 2019 when Formanul Islam was CEO of the company.

The government in 2011 formed Bangladesh Infrastructure Finance Fund Limited (BIFFL), a special non-bank financial institution, to bolster financing in public-private partnership (PPP) projects.

However, the company wasted its funds by investing in Fixed Deposit Receipts (FDRs) with weak banks and financial institutions. It also provided loans to some companies unrelated to PPPs.

"The finance ministry formed BIFFL, the largest non-bank financial institution in terms of paid-up capital, by allocating Tk1,600 crore. Of this, Tk650 crore was invested in fixed deposits with 13 poorly performing banks and NBFIs, which are now unable to repay the funds."

Formanul's claim: This is a false and misleading allegation. During my tenure, the equity of BIFFL stood at Tk2,300 crore and both authorised and paid-up capital were raised to Tk10,000 crore and Tk2,100 crore respectively, with approval of the Board and permission from RJSC.

It was not Tk650 crore. Rather an amount of about Tk1,900 crore was deposited in several banks and NBFIs. Out of that FDRs worth Tk350 crore was used as CRR and SLR requirement of Bangladesh Bank against the loans disbursed, which increased gradually as BIFFL extended more loans over the years. The rest of the money was invested in large infrastructure projects.

It is also not true that 13 poorly performing banks and NBFIs are unable to repay the funds. Please collect information from them on how much they have already paid as principal and interest on FDRs.

Our reply: BIFFL had fixed deposits of Tk1,986 with 13 banks in 2014, of which 80% were with state banks. However, those FDRs were spread to 30 banks and NBFIs in 2015 soon after Formanul joined as the executive director and CEO, according to annual reports of BIFFL.

In 2017, entire deposits were diverted to 51 private banks and NBFIs, withdrawing from state banks violating the finance ministry's regulation. Of the 51 banks and NBFIs, 13 were poorly performing and now Tk650 crore is overdue, according to BIFFL's latest statement. The annual report of 2023 also published the list of banks and NBFIs where interest accrued against FDR suspended.

BIFFL was established with initial paid-up capital of Tk1,600 crore in 2011 which later increased to Tk2,300 crore.

"Besides, loans of Tk500 crore lent to 12 companies including nine auto brick projects have become defaulted."

Formanul's claim: This is again a biased statement. Firstly, not all of these loans were given during my tenure. Second, funds used to finance Green Brick projects were sourced from a refinancing scheme of Bangladesh Bank funded by ADB. The Green Brick projects are struggling due to post-COVID-19 issues. Reportedly, the borrower did not receive any cooperation or support from BIFFL during or post-Covid crisis, making the projects sick.

Our reply: The government established BIFFL as a Special Purpose Vehicle (SPV) to pool investment from local private sector investors and foreign funds to provide long-term financing in infrastructure projects, according to the mandate of the company mentioned in all its annual reports. The reports also mentioned that BIFFL is a specialised NBFI with a special purpose to finance infrastructure projects. BIFFL is the largest NBFI in terms of authorised and paid-up capital.

"The government pins high hope on an infrastructure fund by marking an authorised capital of Tk 10,000 crore for a company that will run the fund. Such a big authorised capital is meant to give a signal to the local and foreign investors that the government aims big for the fund. It will help grow confidence among the investors," according to the introduction of BIFFL given in its annual report for 2013.

Financing in brick projects does not go with the purpose of the company.

"Moreover, BIFFL violated finance ministry guidelines for investments. According to a ministry circular issued in 2015, government, semi-government, autonomous, and semi-autonomous institutions can keep a maximum of 20% of funds allocated under the Annual Development Programme (ADP) and a maximum of 25% of their own funds with private banks and NBFIs in 2015-2019 violating the rule. Besides, it selected all weak NBFIs beyond the prescribed relatively good 13 NBFIs."

Formanul's claim: BIFFL does not implement ADP. It has its own share capital and pays dividends to the shareholders. BIFFL did not deposit the entire amount in all weak NBFIs. It invested only part of it and at that time those were not weak. Please share the information about the investments made in large and medium infrastructure projects as well. Making deposits is not BIFFL's only objective. Making investment in eligible projects is.

Our reply: BIFFL is a government-owned specialised finance company, established in 2011 by a resolution of the Cabinet of the Bangladesh government. It is owned by the government and represented by the Finance Division, Ministry of Finance, according to the BIFFL website.

So, the above circular is also applicable to this company.

In the first paragraph of the rejoinder, Formanul claimed that FDR was not an investment. However, in the fourth paragraph, he termed FDR as an investment, saying, "BIFFL did not deposit the entire amount in all weak NBFIs. It invested only part of it and at that time those were not weak."

His statement about FDR's definition is contradictory.

In our report, we did not say the entire FDR was in weak banks and NBFIs. We mentioned about 13 companies that are now unable to pay back.

Moreover, out of the total FDR, a significant portion of Tk200 crore was invested in four vulnerable NBFIs during Formanul's tenure which are linked to Saiful Alam Masud, chairman of the controversial business group S Alam and his associate loan scammer PK Halder.

For instance, BIFFL invested Tk56 crore as fixed deposit in People's Leasing and Financial Services in 2017 when weak financial health of the company was already revealed by the Bangladesh Bank.

The central bank removed five directors of People's Leasing in 2015 for their alleged involvement in the embezzlement of Tk358 crore and the financial health of the NBFI was worsening since then.

In 2015, PK Halder's company Anan Chemical took control of People's Leasing.

BIFFL also invested Tk138 crore in another three NBFIs in 2017 which are linked with Halder and S Alam.

Of the amount Tk71 crore was invested in International Leasing and Financial Services, Tk52 crore in FAS Finance, and Tk16 crore in Reliance Finance which was renamed Aviva Finance owned by S Alam.

All those NBFIs are now unable to pay back money to BIFFL.

PK Halder took control of the four companies – International Leasing and Financial Services, People's Leasing and Financial Services, FAS Finance, and Reliance Finance – by buying their shares from the stock market during 2015-16.

"All the investments were made during the period of Formanul Islam, then executive director and CEO of BIFFL who was forced to resign in July 2019 on the accusation of making unauthorised FDRs in violation of the ministry circular."

Formanul's claim: This is also a false allegation. FDRs with Farmers Bank (now Padma Bank) was made long before I joined BIFFL on 1 June 2015.

The Board authorised the earlier CEO to make FDRs. All investments as well as FDR status were reviewed periodically by the Audit Committee of the Board and the Board itself. All directors' reports had detailed discussions on investments as well as FDRs. All those reports were signed off by the Chairman of the Audit Committee as well as chairman of the Board of Directors.

In addition, there was a routine internal audit, external audit, management audit, annual audit, Bangladesh Bank inspection report as well as Credit Rating Reports. Not a single report has ever made any observation on the approval process of the FDRs.

Our reply: The BIFFL annual report shows that there was no investment in Farmers Bank till 2014. The investment was shown in the annual report of 2015 when Formanul became CEO. Even if that investment was made before Formanul, he did not take corrective measures to recover the deposit from a newly introduced bank which was already in financial trouble since 2017.

Regarding not taking investment approval from the board, Formanul admitted in a written statement to The Business Standard in our original report that he took the FDR decision on his own.

"There was no FDR policy until I obtained approval for one in 2018. Until then, the CEO had the authority to make FDRs, and the board-approved Treasury Manual of 2018 also authorised the CEO to invest in the money market as well as FDRs," according to Formanul's previous statement.

However, in the rejoinder he differs from his statement.

In 2020, the Anti-Corruption Commission (ACC), filed a case against Formanul and Nisarul on charges of abuse of power and breach of trust.

In our original report Formanul claimed, "After my forced resignation on 28 July 2019, BIFFL lodged a complaint with the ACC, accusing me of four offences – one of which involved unauthorised FDRs in breach of the government circular. The ACC dismissed all but the complaint related to the FDRs."

"When contacted, SM Anisuzzaman, the executive director and CEO of the company who joined after Formanul's resignation, however, said the circular must apply to BIFFL, as it is a fully government-owned organisation.

"He said BIFFL's capital is provided by the finance ministry and it differs from other state banks and NBFIs in that it does not collect deposits from the public."

Formanul's claim: Please ask for at least one document that shows that BIFFL is a State-Owned Entity. Please consult BIFFL's treasury manual, 2018 which has detailed provisions on receiving and making FDRs. It has never been the intention of the government to keep injecting equity into BIFFL. BIFFL has rather increased its equity base from profits. It has the opportunity to leverage its equity at least ninefold and contribute more to the overall development of the economy by investing more in eligible projects/sectors.

Our reply: BIFFL is a government-owned specialised finance company, established in 2011 by a resolution of the Cabinet of the Government of Bangladesh. It is owned by the Government of Bangladesh and represented by the Finance Division, Ministry of Finance, according to BIFFL's introduction posted on its website, which clearly says that it is a government company.

"Meanwhile, following the toppling of Sheikh Hasina's government, Formanul, who served at BIFFL for over four years since 2015, filed a criminal case in September against several high-profile individuals, including former finance secretary Abdur Rouf Talukder and Hasina's private industry and investment adviser Salman F Rahman. Also named in the case are former NBR chairman and BIFFL board member Abu Hena Rahmatul Muneem, along with nine others.

"In the case documents, Formanul claims he faced harassment and threats after refusing to approve loans for Salman. He alleges that Rouf pressured him for the loans in 2019, and after he declined, he was removed from his position. The case has now reached court, with the Police Bureau of Investigation ordered to investigate the allegations."

Formanul's claim: My case is against forceful resignation and the accused are the Board members present in that particular meeting. It has nothing to do with the profile of the individuals. Since the matter is now sub-judice and the learned court has ordered an inquiry by PBI, it is not lawful to glorify any accused person by a news report and the hidden intention is construed to mean unduly influence the process of the court.

Please note that according to the provisions of my Letter of Appointment, there should be a notice period of 3 (three) months before termination of my contract. Again, according to the DFMI circular, approval of Bangladesh Bank shall be obtained before the resignation of any CEO of any Bank/NBFI and at least 1 (one) month's notice should be served upon Bangladesh Bank in that regard. In my case, even though I was forced to issue a "Notice of Resignation", Mr Abdur Rouf Talukdar accepted it instantly and I was forced to leave the office premises immediately. My SIM was blocked, email disabled and car keys taken away in no time. I was not given an opportunity to be heard. Nor was there any arrangement for charge handover by me. Even my dues such as provident fund and gratuity have not been paid as yet.

Our reply: Formanul is contradicting his own statement. In one line, he is claiming about his forceful resignation that "It has nothing to do with the profile of the individuals." However, in another line, he claims that "In my case, even though I was forced to issue a 'Notice of Resignation', Mr Abdur Rouf Talukdar accepted it instantly and I was forced to leave the office premises immediately," which reflects that he is categorically blaming Abdur Rouf.

However, our report was based on facts and not to glorify any individual.

"Abdur Rouf Talukder, who became chairman of BIFFL in 2018 while serving as finance secretary, raised concerns in 2019 after discovering the poor investments in weak NBFIs."

Formanul's claim: This shows how inept and biased a reporter can be! No question was asked, on how many FDRs were made and how many projects were financed during the time of Mr Abdur Rouf Talukdar's joining as Chairman of the BIFFL Board and until I was forced to resign! Please check all Audit Committee Meeting minutes, Board Meeting minutes and Bangladesh Bank Inspection Report during the period of 2018-2019. All Audit Reports, Directors' Reports and Board Minutes were finally signed by Mr Abdur Rouf Talukdar.

Our reply: In our original report, we mentioned that Formanul was involved in conflict with Abdur Rouf over FDR placement in weak banks and non-bank financial institutions. Formanul himself also admitted it.

"In conversations with top officials at BIFFL, The Business Standard has learned that Rouf sought to take action against Formanul, ultimately pressuring him to resign."

Formanul's claim: This is a great admission by IDCOl management. My case is all about this. I wish to include you as witnesses to my case.

Our reply: Formanul admits Rouf forced him to resign as the action of unauthorised FDR. However, in the above statement, he also claims that "My case is against forceful resignation and the accused are the Board members present in that particular meeting. It has nothing to do with the profile of the individuals."

This is how Formanul gave contradictory statements in his rejoinder.

"An internal audit conducted after the resignation of Formanul found that deposits were invested in a joint signature of Nisarul Kabir Siddiqui, then senior principal officer (Treasury) of BIFFL. Later, Nisarul was also removed."

Formanul's claim: How come the reporter did not ask about internal audit, external audit, board audit, Bangladesh Bank inspection during more than 4 (four) years of my tenure at BIFFL?

Why was irregularity revealed only after my forceful departure? Any reporter with minimum professional standards and ethics would have delved into it.

Our reply: This is not part of our report.

"'When BIFFL new management moved to recover deposits from the weak organisations, they came to know that those deposits were given in exchange of commission,' said SM Anisuzzaman."

Formanul's claim: This is such a derogatory, defamatory, libellous and malicious remark meant to assassinate my character. If Mr Anisuzzaman has any such evidence why did not he disclose those to the Investigating Officer of ACC? I wonder why the reporter of a well-reputed Daily did not ask for solid evidence and relied only on hearsay! This paragraph shall be immediately removed because it is against the code of conduct of the press and journalists.

Our reply: The central bank has also confirmed the authenticity of the claims regarding commission transactions associated with fixed deposit investments in BIFFL. In a letter to BIFFL dated 16 April 2023, the Bangladesh Bank said it learned from credible sources that some state-owned banks and NBFIs were investing in fixed deposits without conducting proper financial analyses or verifying the security of state funds.

In some cases, these investments were being influenced by individuals, according to the central bank.

In light of this, the central bank instructed BIFFL to conduct thorough analyses of financial health before making fixed deposit investments in any NBFIs. It also recommended the formation of a separate investment committee to oversee such decisions.

"He said classified loans surged to above 15% from less than 2% after Formanul resigned as all investments made during his tenure turned defaulted."

Formanul's claim: There was no bad loan when I was forced to leave BIFFL. He is trying to shift the loan management inefficiency on me after more than 5 (five) years of my departure. Unfortunately, the biased reporter took the statement without asking any questions!

Our reply: FDR of Tk650 crore made by Formanul turned overdue. Loans of Tk500 crore given to 12 companies during his tenure also turned defaulted. However, how those were shown as regular during his tenure should be investigated.

"The central bank has also confirmed the authenticity of the claims regarding commission transactions associated with fixed deposit investments in BIFFL. In a letter to BIFFL dated 16 April 2023, the Bangladesh Bank said it learned from credible sources that some state-owned banks and NBFIs were investing in fixed deposits without conducting proper financial analyses or verifying the security of state funds."

Formanul's claim: This is another baseless, frail and irrelevant statement made in the report. It is also defamatory and libellous. The reporter should have asked why such a report after 4 (four) years of my departure from BIFFL and whether BIFFL was specifically named in that report?

Our reply: That portion of the report was based on Bangladesh Bank's letter to BIFFL.

"Formanul's lending to some companies does not go with the mandate of the formation of BIFFL to facilitate PPP projects. For instance, despite being a specialised financial institution, BIFFL invested Tk25 crore in commercial paper against a trading company Computer Source in the year 2016 without any collateral which turned to default later. The new management after Formanul's resignation has written off the loans in the year 2022 as it remained bad consistently, according to the BIFFL annual report of 2023." 

Formanul's claim: This is another lie and misguiding statement. Please refer to clause 2.8.5(i) of BIFFL's Credit Policy. Commercial Paper is a board-approved instrument for financing.

Our reply: We mentioned the purpose of establishing BIFFL above. 

"Formanul also lent Tk250 crore to nine auto brick projects during his tenure which also goes against the company's mandate. All loans turned to default after Formanul resigned."

Formanul's claim: This crosses all limits of stupidity! Any reporter of average IQ would have asked, was Formanul Islam the only person running BIFFL? Was he a dictator? What were the Board of Directors, Management Committee of the Board, Audit Committee of the Board, Bangladesh Bank, Internal Control and Compliance Department of BIFFL and Board approved Audit Firms doing? Notably, I am not even a member of the Audit Committee of the Board!

Our reply: Under the guidance of a diverse eight-member Board of Directors, consisting of 7 senior government officials and a dedicated Chief Executive Officer, BIFFL steers Bangladesh's sustainable development journey with esteemed global partners like the World Bank, JICA, ADB, KfW, and AFD.

This paragraph is posted on the BIFFL website which reflects how responsible a dedicated CEO is for the misdeeds of the company.

Any investment or loan proposal is placed to the board by the CEO. It is the CEO's responsibility to conduct proper analysis before placing investment proposals to guide board directors. Even if board directors make wrong decisions, CEOs are empowered by the Bangladesh Bank to raise objections or inform the regulator. 

However, in BIFFL, Formanul did not raise objections against those wrong investments, rather he placed the proposals to the board