Global Islami, Union banks freed from S Alam’s grips

The Bangladesh Bank yesterday reconstituted the boards of two banks and decided to restructure two others – all controlled by S Alam Group – by next week in a bid to free them up from the grip of the Chattogram-based business cartel.

The central bank also assured businesses that it will lift the restrictions on opening letters of credit (LCs) imposed on these banks.

In a separate development, the newly reconstituted board of Islami Bank Bangladesh has decided to re-audit all loans disbursed since S Alam Group took control of the bank.

The central bank appointed new five-member boards of directors for both Global Islami Bank and Union Bank. Former Meghna Bank managing director Nurul Amin will lead the board for Global Islami Bank, while former Islami Bank managing director Fariduddin Ahmed will chair the board for Union Bank.

According to the Bangladesh Bank, the boards of First Security Islami Bank and Bangladesh Commerce Bank will be restructured in the next one week.

In a separate development, the central bank restructured the board of United Commercial Bank (UCB).

The board members include former Bangladesh Bank executive director Sajjad Hossain, former Agrani Bank deputy managing director Md Yusuf Ali, and chartered accountant Obaidur Rahman FCA.

Additionally, Sharif Zahir and Md Tanvir Khan have been appointed shareholder directors, on the condition that they resign from their positions on the boards of National Finance and Eastland Insurance Company, respectively.

Earlier last week, the Bangladesh Bank reconstituted Islami Bank, freeing it from the control of S Alam Group.

The other board members of Global Islami Bank are: Bangladesh Bank's former executive director Jamal Mollah; former Islami Bank deputy managing director Nurul Islam Khalifa; Dhaka University's International Business Department Professor Abu Hena Reza Hassan; and Chartered accountant Mahmud Hossain.

The other board members of Union Bank are Bangladesh Bank's former executive director Humayun Kabir; former RAKUB deputy managing director Saiful Islam; Dhaka University's Department of Banking and Insurance Professor Shahidul Islam Jahid; and Chartered accountant Sheikh Jahidul Islam. 

All of the members of the two banks have been appointed as independent directors, according to separate circulars issued by the central bank yesterday.

During an emergency meeting with a delegation from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Bank Governor Ahsan H Mansur announced the decision to restructure the boards of banks controlled by S Alam Group.

After the meeting, BGMEA Senior Vice-President Abdullah Hill Rakib told reporters, "The Bangladesh Bank has agreed to launch a Tk3,000 crore soft loan package and continue EDF activities. The governor has assured a swift resolution to the LC issue for the six banks."

Several attendees shared details of the meeting with The Business Standard, saying the governor agreed to continue the Export Development Fund (EDF) and will continue to provide regular loans from the existing $3 billion.

A week ago, the central bank halted LC operations at six banks controlled by S Alam Group due to widespread corruption and irregularities, suspending the import and export activities of businesses associated with these banks.

A BGMEA official present at the meeting said the BGMEA leaders highlighted that the garment sector has been severely impacted by the ongoing unrest in the country over the past two months and stressed the need for Bangladesh Bank's support to maintain export flow and remain competitive internationally.

 Auditing Islami Bank loans 

In the first meeting of the newly reconstituted board of Islami Bank, it was decided to re-audit all loans issued during the tenure of the S Alam Group.

An official present at the meeting stated, "We will review who took out loans over the past seven years and the process involved. We aim to determine whether these loans have proper collateral."

Last week, Bangladesh Bank dissolved the board of Islami Bank controlled by S Alam Group and appointed five independent directors. An independent director at the meeting noted that, in addition to auditing the bank's loans, the board will also review the investments made by the bank's Treasury Department, including money and foreign currency investments.

Furthermore, the board decided to assess the recruitment processes for the bank's personnel over the past seven and a half years. To support this review, three separate external auditors will be appointed.

Before taking full control of Islami Bank on 5 January 2017, the S Alam Group was already a client of the bank's Khatunganj branch in Chattogram, with a loan exposure of approximately Tk4,000 crore. Following the takeover, the group's borrowing from the bank skyrocketed.

 Half of Islami Bank loans went to S Alam Group

According to sources from the central bank and documents from Islami Bank, as of 18 August 2024, the total loan portfolio of Islami Bank stands at Tk1.5 lakh crore, with total deposits amounting to Tk1,53,274.

Of these loans, Tk74,972 crore has been identified as benefiting the S Alam Group, which constitutes half of the total loans. The loans amounting to Tk14,427 crore were directly under the name of seven S Alam Group companies.