Dhaka North toils to withdraw deposits from 4 crisis-hit banks linked to S Alam Group

Highlights:

• The DNCC tries to withdraw Tk29 crore from the banks
• The banks are in serious liquidity crisis
• Now even pay orders cannot be encashed
• The corporation wants to shift the amount to state-owned banks

Four shariah-based banks, which were controlled by the controversial business conglomerate S Alam Group, cannot pay back deposits of the Dhaka North City Corporation (DNCC) amounting to Tk29 crore due to a liquidity crisis.

Recently, after being unable to recover its deposits, the corporation sent a letter to the governor of the central bank. However, according to bank sources, no directive has been issued by the central bank thus far.

The banks are Global Islami Bank, Social Islami Bank, First Security Islami Bank, and Bangladesh Commerce Bank.

The corporation in the letter said it applied to withdraw Tk4 crore in Fixed Deposit Receipt (FDR) funds from two branches of Global Islami Bank on 10 July. Although it received pay orders within nearly two months, it has yet to receive the cash.

The corporation said it has not received Tk3 crore from the Panthapath Women's Branch and Tk1 crore from the Uttara Branch of Global Islami Bank.

The DNCC stated that it has deposited funds in private commercial banks within its designated jurisdiction. Although pay orders were received upon the maturity of deposits in two of these banks, they could not be encashed, it said. 

Additionally, despite sending letters and making repeated contacts, the corporation said, it has yet to receive pay orders for matured deposits from the other two banks.

"We have a policy to place funds in banks offering higher returns. Therefore, we plan to withdraw funds from these banks and deposit them in state-owned banks. Since we have been unable to withdraw the funds, we sent a letter to the Bangladesh Bank governor," Mir Khairul Alam, chief executive officer of the Dhaka North City Corporation, told TBS.

The DNCC said it had a fixed deposit of Tk10 crore at the Mohammadpur branch of Social Islami Bank. However, despite receiving a pay order from the bank following an application for the withdrawal of the deposit upon its maturity submitted on 10 July, the corporation said, it has been unable to encash it.

The corporation said there were two fixed deposits totalling Tk10 crore at the Bishwa Road branch of First Security Islami Bank but to date, the bank has not issued a pay order to it.

There was a deposit of Tk5 crore at the Pragati Sarani branch of Bangladesh Commerce Bank, said the corporation, adding that it also submitted an application on 19 September but has yet to receive a pay order.

Despite repeated attempts by TBS for comments, senior officials of the four banks could not be reached over the phone.

Due to loan fraud and various irregularities, nearly 12 banks in the country have been facing a severe liquidity crisis for the past two years. Among these, eight banks were under the control of the S Alam Group during the Sheikh Hasina regime.

The liquidity crisis in the banks controlled by S Alam Group worsened following Hasina's downfall. Several instances of fraud and irregularities within these banks came to light, resulting in diminished confidence among customers. As a consequence, depositors started withdrawing their funds, and the amount of withdrawals is increasing as new deposits are not being made.

Despite the challenges, the central bank started providing liquidity guarantees to the weakened banks. Seven banks received approximately Tk5,000 crore in guarantees from the central bank in the first month, according to central bank data.

Islami Bank Bangladesh received Tk1,495 crore, Social Islami Bank Tk1,000 crore, Global Islami Bank Tk295 crore, First Security Islami Bank Tk775 crore, Union Bank Tk150 crore and National Bank Tk820 crore.

Nine private banks have faced a deficit of nearly Tk18,000 crore in their current accounts with the central bank.

According to the central bank data, First Security Islami Bank tops the list with the largest deficit of Tk7,269.66 crore, followed by Social Islami Bank at Tk3,394 crore and National Bank at Tk2,342 crore.

Other banks facing significant shortfalls with Union Bank Tk2,209.15 crore, Islami Bank Bangladesh Tk2,201.95 crore, Bangladesh Commerce Bank Tk380.95 crore and Global Islami Bank Tk39.39 crore.

Besides, Padma Bank and ICB Islami Bank face deficits of Tk234.48 crore and Tk95.42 crore, respectively.