Bangladesh Bank did not allow Al-Arafah Islami Bank to sell 10 percent of its shares to Saudi-based Islamic Development Bank (IDB).
“We advised Al-Arafah to sell those shares to local parties, if necessary, to increase the bank's capital,” said a senior official of the central bank.
The Islamic Corporation for the Development of the Private Sector or ICD, the private sector financing arm of IDB, signed a deal in March to invest about Tk 155 crore to acquire a 10 percent stake in Al-Arafah.
Al-Arafah was supposed to issue around 11 crore fresh shares worth Tk 10 each with a premium of Tk 4 to the ICD, in a bid to raise its capital.
Khaled Al Aboodi, chief executive of ICD, and Badiur Rahman, then chairman of Al-Arafah Islami Bank, had inked the agreement on behalf of their respective organisations.
Accordingly, Al-Arafah applied to the central bank for regulatory approval. After analysing the situation, the central bank suggested that if Al-Arafah needs capital, it should raise it from the local market, not from any foreign organisation.
Habibur Rahman, managing director of Al-Arafah Islami Bank, also confirmed the central bank's stance.
“If we need to raise our capital, we can do it by issuing fresh shares to local parties,” said Rahman, quoting a letter that BB sent to them about 10 days back.
When asked whether IDB was updated on the matter, the managing director said, “Not formally.”
“We will place the issue before the board of directors, and the board will decide what to do,” said Rahman.
Earlier, the board of Al-Arafah was divided over the issue of selling a 10 percent stake to IDB, particularly on the issue of giving veto power to IDB.
The aggrieved group had also taken the issue to court. A shareholder, Shamim Khaled, filed a writ petition last month, opposing the veto power to IDB.
According to the deal signed between IDB and Al-Arafah, the Saudi-based development bank was allowed to nominate two directors in the bank's board with veto power, which no other directors had.
“Those two directors can no way enjoy veto right ... it is unacceptable,” an aggrieved director of the bank told The Daily Star, wishing not to be named. He also said they were not aware of the veto right before signing the deal.