How Islami Bank grabbed by S Alam

Silent coup held: The Economist

Staff Correspondent: Islami Bank of Bangladesh has fallen into disrepair after being controlled by Chittagong-based conglomerate S Alam Group under the auspices of the government intelligence agency.
On the morning of January 5, 2017, the then chairman, managing director and a vice chairman of Islami Bank were called from an agency. After that, they were taken in a car to the office of the agency. Their resignation letter was already prepared there. When they were asked to sign it, all three immediately complied.
A few hours later, a closed-door meeting of the bank’s board of directors was held at the five-star hotel Radisson. In that meeting, the directors “elect” new directors in their place.
In this manner, the change of control of the Islamic bank was called a “silent coup” in the famous British newspaper The Economist.
Before this reshuffle, Chittagong-based industrial company S. Alam Group bought the shares of the bank. The new directors who got the responsibility of therepresentative of various informal organizations of S. Alam Group.
After the change of control of the bank, in these six years, the number one bank of the country has been under the pressure of a mountain of irregularities. S. Alam Group converted the bank’s huge amount of deposits into its own business funds. As a result, the bank has to be in a difficult situation even to conduct basic general operations.
With the help of dozens of officers of the bank, many of whom were associated with the Khatunganj branch of Chittagong at one time or another, the bank has done S. Alam Group. These officers have been appointed at the top level of the bank after being promoted at a dramatic speed from the very field level. Thousands of new workers and officials have been recruited to tighten control, the majority of whom are based in the Chittagong district of group leader Saiful Alam. The educational qualifications of the new recruits are questionable. In some cases, no tests or evaluations were even conducted prior to recruitment.
Bangladesh Bank remained inactive during this entire period. There was no effective intervention, control or even the faintest attempt of restraint on the part of the central bank.
And these irregularities are felt at the customer level as well. As a result, the size of the total deposits of banks is gradually decreasing. Even the amount of cash in the bank – in the words of Bangladesh Bank – has reached a “fragile” level. To deal with the emergency, the central bank had to provide Tk 8000 crore under special measures. In February 2020, Islami Bank asked for a special loan of Tk 8000 crore! But amid the severe liquidity crisis, the bank has given new loans of thousands of crores of taka to non-existent companies, so that their previous huge loans do not default. After that, as there was no situation to take new loans, the bank’s corporate social fund was also given a hand.
Six years after the change of ownership of Islami Bank, the poor state of the bank has emerged in a long investigation. An intelligence agency has scrutinized hundreds of pages of internal documents of Central Bank and Islami Bank in preparation of this report. These documents include several reports regarding the inspection of the Central Bank, several letters of the Central Bank sent to Islami Bank, the Central Bank’s own assessment of the situation of the Bank, Company formation documents of S. Alam Group-affiliated institutions, Islami Bank’s large loan-disbursement documents, Bank’s internal CSR documents, Bank’s annual report from 2015 to 2021, details of Islami Bank’s 20,000 officers and employees, biographies of senior officers , Human Resource and Promotion Policy, etc.
Several officials of Bangladesh Bank and Islami Bank spoke to media separately.
Statement of S. Alam Group-related loans
S. Alam Group was a customer of the bank’s Khatunganj branch in Chittagong before taking control of Islami Bank. However, after the change in ownership, this level of borrowing increased dramatically. Their Nami-Benami (name and unknown) loans spread to branches in the capital and outside the capital in North Bengal.
According to Islami Bank’s 2016 annual report, by the end of 2015 three companies of S. Alam Group were among the top 20 borrowers of the bank. These three institutions are S. Alam Steels and Refined Sugar Industries, S. Alam Vegetables Oil and S. Alam Super Edible Oil. At that time, the total debt of these three institutions was Tk 3,108 crore. By the end of 2016 – that is, just before the change in ownership – this debt had come down slightly to Tk 3,008 crore.
But after the change of ownership, the amount of this loan started to increase.
By the end of 2020,two new S. Alam Group-affiliated firms join the list of top borrowers. And by the end of 2021, four new institutions were added. Thus, in the list of top borrowers of 2021. A total of nine companies are owned by the Alam Group and the relatives of the group leader Saiful Alam.
In 2021 S. Alam Steel’s debt was Tk 3,224 crore, Tk 3,850 crores of Alam Vegetables, Tk 4,153 crores of S. Alam Super Edible Oil and Tk 1,476 crore of S. Alam Cold Roll Steel andIspat Ltd., a subsidiary of S. Alam Group, had a debt of Tk 1,440 crore.
And Infinia CR Strips, owned by Ahsanul Alam, son of group chairman Saiful Alam, had a debt of Tk 1,418 crore. Unitex LP Gas, controlled by Saiful Alam’s daughter’s son-in-law Belal Ahmed, had a debt of Tk 1,015 crore. Saiful Alam’s nephew Mostan Billah Adil’s Adil Corporation owed Tk 1,067 crore. Adil’s wife, Sadia Jamil owed Tk 1,072 crore to Sadia Traders. Mostan Billah Adil again Director of Global Islami Bank owned by S. Alam Group and Managing Director of Ahsanul Alam’s Infinia Spinning Mill.
The combined loan amount of these nine institutions was Tk 18,718 crores. That is, in five years S. Alam Group’s debt in Islami Bank increased more than six times. The total disbursed loan amount of Islami Bank till that year was Tk 1 lakh 19 thousand 117 crores. 16.55% of the bank’s loan was taken by S. Alam Group-affiliated companies.
However, several senior officials of Islami Bank told that the size of S. Alam Group related loans has at least doubled in a year.
The same light is found from other sources as well. Bangladesh New Age and New Nation newspapers quoted Bangladesh Bank observers as saying that the loan amount related to Alam Group will be more than Tk 30 thousand crore.
According to a report in the Business Standard newspaper, Islami Bank has disbursed new loans of more than Tk 25 thousand crore till September 2022. However, in the previous five years, the bank has distributed only Tk 6 thousand crore.
These new loans include loans to several paper or defunct companies. Some of these companies have received loans of thousands of crores of taka within a few days or a few months of company formation. Some loan proposals are approved within two days of application. And since it is a special Shariah-based loan, in many cases collateral is not taken.
Explaining Alam Group’s sudden increase in loans, it said, “Investments were made after reviewing the business transactions and scope in the light of bank-customer relationship and rational needs. Which has been done by following the banking rules. It should be noted that due to the increase in the price of products in the international market, customers naturally had to import products at higher prices. Due to which the customer has to pay more investment than before.”
Mahbubul Alam, ex-Managing Director of Islami Bank Bangladesh has planned and implemented the whole plot and later he was rewarded. He become Chairman of Social Islami Bank Limited (SIBL), a sister bank of S. Alam Group. When a through investigation was started in SIBL loan disbursementsunder the pressure of S. Alam Group. He then left the country, fearing harassments both from the regulatory authority and S. Alam Group. (To be continued)