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June 12, 2025

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THURSDAY, JUNE 12, 2025
Central bank strips Shah Alam of key posts on bribe allegation

Banking

TBS Report
04 February, 2021, 10:50 pm
Last modified: 05 February, 2021, 10:18 am

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Central bank strips Shah Alam of key posts on bribe allegation

TBS Report
04 February, 2021, 10:50 pm
Last modified: 05 February, 2021, 10:18 am
Central bank strips Shah Alam of key posts on bribe allegation

Bangladesh Bank Executive Director Md Shah Alam was stripped of the responsibility to supervise two vital departments on Thursday as an immediate action against allegations of taking bribes.

Md Serajul Islam, executive director of the central bank, said Alam was removed from the Department of Financial Institutions and Markets and the Department of Bank Inspection. 

Alam was in charge of the Financial Institutions and Markets department for nearly a decade. During his tenure, the non-bank financial institution sector gradually worsened and two such institutions collapsed.

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One of these institutions – the People's Leasing and Financial Services Limited – was put in liquidation in June 2019 and the decision to liquidate another one – Bangladesh Industrial Finance Company Limited (BIFC) – is pending with the Ministry of Finance.

A few more institutions, including International Leasing and Financial Services Ltd (ILFS), and Reliance, are fraught with massive corruption.

While one after another financial institutions were collapsing, the problems in monitoring failure of the central bank were not addressed.

Finally, the role of Shah Alam came to light after Rashedul Haque, managing director of ILFS, confessed in the court about how the central bank officials were bribed to cover up corruption.

Rashedul Haque, who was arrested by the Anti-Corruption Commission (ACC) on 24 January over allegations of his involvement in five cases of fraud by ILFS, gave the confessional statement on Tuesday. 

Rashedul is the close aid of Prashanta Kumar Halder alias PK Halder, who is on the run after allegedly siphoning off thousands of crores of taka from Bangladesh.

In his confession to the court, Rashedul said Shah Alam, who was previously the central bank's general manager and now its executive director, used to take Tk2 lakh in bribes every month. Rashedul told the court that Reliance would hide the bribes in its miscellaneous costs.

Despite the worsening health of the non-bank financial sector under his monitoring, Shah Alam joined in the race of becoming deputy governor of the Bangladesh Bank.

When contacted over the phone regarding the bribe allegation raised against him, Shah Alam did not respond.

How the failure of central bank monitoring caused suffering for non-bank financial institution sector

The collapse of two non-bank financial institutions (NBFIs) has had an adverse impact on the whole industry. It has predictably pushed profitability down to the bottom.

In the first nine months of 2019, as much as 70% of the listed NBFIs went through a severe decline in financial performance, leading to losses in earnings per share.

The worsening financial performance of the companies pushed the profitability indicators of the NBFI market into negative territory.

In the January-March quarter of 2019, returns on assets and returns on equity were negative 0.1% percent and 0.5% respectively. But in the April-June quarter, the indicators showed a positive trend again.

However, the overall deposits continued to decline in the NBFI sector amid the pressure of fund withdrawal after the People's Leasing was put into liquidation, thereby intensifying the liquidity crisis.

NBFI deposits declined by 2.7% in the April-June quarter of 2019 in comparison with the previous quarter, according to the data made available by Bangladesh Bank. 

Currently, 34 NBFIs are operating in the market, of which only four have remained in the green zone, according to stress testing by the Bangladesh Bank. That means only 11% companies are risk free for depositors.

The total default loan in the NBFI sector stood at Tk7,320 crore at the end of June, 2019 which was 11% of the total loan.

Of the 23 listed NBFIs, eight companies have been trading shares at below Tk10.

Economy / Top News

Shah Alam / Bangladesh Bank

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