The Bangladesh Bank took decisive action yesterday by reconstituting the boards of directors for two banks under the control of the Chattogram-based S Alam Group. Additionally, the central bank announced plans to restructure the boards of two other banks by next week to reduce the group’s dominant influence.

In a move to ease banking operations, the central bank also assured the business community that it would soon lift the restrictions on opening letters of credit (LCs) imposed on these banks.

In a related development, the newly reformed board of Islami Bank Bangladesh has initiated a comprehensive re-audit of all loans issued since the S Alam Group gained control of the bank.

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

Bangladesh Bank has stated that the boards of First Security Islami Bank and Bangladesh Commerce Bank will undergo restructuring within a week.

Moreover, the central bank restructured the board of United Commercial Bank (UCB), appointing notable figures including former Bangladesh Bank executive director Sajjad Hossain, former Agrani Bank deputy managing director Md Yusuf Ali, and chartered accountant Obaidur Rahman FCA. Shareholder directors Sharif Zahir and Md Tanvir Khan were also appointed, contingent upon their resignation from positions on the boards of National Finance and Eastland Insurance Company, respectively.

Earlier last week, the central bank reconstituted Islami Bank’s board, liberating it from S Alam Group’s control.

The new board members of Global Islami Bank include former Bangladesh Bank executive director Jamal Mollah, former Islami Bank deputy managing director Nurul Islam Khalifa, Dhaka University professor Abu Hena Reza Hassan, and chartered accountant Mahmud Hossain. The new Union Bank board includes former Bangladesh Bank executive director Humayun Kabir, former RAKUB deputy managing director Saiful Islam, Dhaka University professor Shahidul Islam Jahid, and chartered accountant Sheikh Jahidul Islam. All have been appointed as independent directors, according to official circulars issued by the central bank.

In an emergency meeting with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Bank Governor Ahsan H Mansur announced the restructuring of banks associated with S Alam Group.

Following the meeting, BGMEA Senior Vice-President Abdullah Hill Rakib shared that the central bank had agreed to launch a Tk3,000 crore soft loan package and continue Export Development Fund (EDF) activities, with a prompt resolution of the LC issues for the six affected banks.

Several meeting participants confirmed that the central bank would maintain the EDF and provide regular loans from the existing $3 billion fund. This follows a week after the Bangladesh Bank suspended LC operations at six S Alam Group-controlled banks due to corruption and irregularities, halting related import and export activities.

BGMEA leaders emphasized the detrimental impact of recent civil unrest on the garment sector and urged the central bank to support sustained export flow and global competitiveness.

Audit of Islami Bank Loans

In the first meeting of the newly restructured board of Islami Bank, a decision was made to re-audit all loans issued during S Alam Group’s control of the bank. An official present at the meeting stated, “We will scrutinize who received loans over the past seven years and the processes involved, with the goal of verifying collateral adequacy.”

Last week, the Bangladesh Bank dissolved the S Alam Group-controlled board of Islami Bank, appointing five independent directors in its place. Alongside loan audits, the board will review the bank’s Treasury Department investments, including those in money markets and foreign currencies.

The board will also evaluate recruitment practices from the past seven and a half years. Three external auditors will be appointed to assist in these reviews.

Before S Alam Group fully assumed control of Islami Bank on January 5, 2017, the group already had a loan exposure of approximately Tk4,000 crore with the bank’s Khatunganj branch in Chattogram. Post-takeover, the group’s borrowing from Islami Bank surged significantly.

Half of Islami Bank’s Loans Tied to S Alam Group

As of August 18, 2024, Islami Bank’s total loan portfolio stands at Tk1.5 lakh crore, with deposits totaling Tk1,53,274 crore. Of these loans, Tk74,972 crore—roughly half—has been traced back to S Alam Group, with Tk14,427 crore directly under the names of seven S Alam Group companies, according to central bank sources and Islami Bank documents.