Five Islami banks put on tight leash

Bangladesh Bank has instructed five shariah-based banks to send a daily log of sanctioned credit of Tk 10 crore and above as it looks to restore calm and order at the lenders that have recently faced withdrawal pressure.

The five banks are: Islami Bank, Social Islami Bank (SIBL), First Security Islami Bank (FSIBL), Global Islami Bank and Union Bank, according to documents seen by The Daily Star. The instruction came on Wednesday.

Furthermore, SIBL and Global Islami Bank have been asked not to disburse large loans of Tk 50 crore and above, according to the two banks' managing directors.

With this, the central bank has brought the five banks under its extensive monitoring, said BB Spokesman Md Mezbaul Haque.

"BB has asked the bank not to disburse any loan amounting to Tk 50 crore and above. But I do not know why the central bank has given the instruction," said Syed Habib Hasnat, Global Islami Bank's MD, adding that the bank would follow the central bank instructions properly.

Zafar Alam, the MD of SIBL, said the lender would be able to give out more SME loans after the central bank has put a hold on its large loan disbursement.

ABM Mokammel Hoque Chowdhury, managing director of Union Bank, said that the lender would abide by the central bank instructions properly.

Mohammed Monirul Moula, managing director of Islami Bank, denied receiving central bank instruction.

Syed Waseque Md Ali, managing director of FSIBL, did not respond to The Daily Star's request for comment.

The tightened leash on the five lenders, where Chattogram-based business giant S Alam Group has substantial stakes, comes after they were put in a delicate position by depositors' withdrawal requests following reports of alleged lending irregularities.

On December 6, the banks borrowed Tk 4,000 crore from the central bank under a special liquidity support arrangement to manage the depositors' demands. Islami Bank and Global Islami Bank took a further Tk 1,250 crore.

On Monday, the central bank re-appointed an observer at Islami Bank and dispatched an observer for the first time at FSBIL, whose chairman is S Alam Group chief Mohammed Saiful Alam.

The central bank usually appoints observers in banks whose financial health is fragile. The observer takes part in the board meetings and keeps watch on the bank's operations. The observer is withdrawn once the financial health improves.

BB is also investigating Islami Bank for disbursing Tk 7,246 crore in loans to nine companies violating banking rules.

On December 4, the High Court directed the authorities to probe the alleged loan scams at Islami Bank, Social Islami Bank and FSIBL.

The Anti-Corruption Commission, BB, the Bangladesh Financial Intelligence Unit and the Criminal Investigation Department of Police have been asked to submit probe reports to the court by April 5.

If the allegations of loan scams are found to be true in the probes, the agencies will have to inform the court about the actions taken against the persons involved in the scams.

Saiful Alam's son Ahsanul Alam is the chairman of Union Bank, while his daughter Maimuna Khanam and son-in-law Belal Ahmed are the vice-chairpersons of Global Islami Bank and SIBL respectively.