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Over half of Islami Bank's outstanding loans went to S Alam Group in insider lending after the fast-acquisitive conglomerate took over its ownership, imperilling its liquidity situation.
Newly appointed chairman of Islami Bank Bangladesh PLC Obayed Ullah Al Masud came up Thursday with such disclosure, now that the largest private-sector bank is reclaimed from S Alam's impugned possession after regime change in the country.
The country's largest Islamic bank under the new board has already started work to get complete information about the actual amount of loans the Chattogram-based controversial corporate availed. "It might take another week or so to get the detailed information," he said.
The bank's chairman shared the information while talking to reporters after a meeting between newly reconstituted board of directors of Islami Bank and Bangladesh Bank governor Dr Ahsan H. Mansur at the BB headquarters.
Mr. Masud, who took charge of the crisis-ridden IBBL on August 22 following the central bank's intervention dissolving the previous board, said the volume of outstanding loans from the bank stood at Tk 1.74 trillion by the end of June 2024.
Sources close to the new management guess that the money S. Alam Group bagged could run up to Tk 900 billion.
And the Group overvalued its assets and used those to avail the loans, the chairman said.
"Reassessment of their (S. Alam Group's) assets is underway. We need another week to have exact figures of the total loans taken by the business group," said Mr Masud, former managing director of Rupali Bank.
As the group's collateral is insufficient to cover the amount borrowed by them, the IBBL chairman said, they have sent a letter to the ministry of law to identify any asset outside the collateral for compensation.
About the bank's current liquidity situation, he said the bank faced a capital shortfall of Tk 23.0 billion when the new board took over the unconventional lending entity.
But the most encouraging part is that the credit shortfall keeps narrowing daily, coming to Tk 20.0 billion as of Thursday (September 05). "We expect the situation will improve by the end of this year," he said.
The new IBBL chair reassured the customers that they would no longer face difficulties in withdrawing funds as deposits last week exceeded withdrawals, resulting in a net positive balance.
Asked about action against IBBL officials who aided S Alam Group in committing such pecuniary crimes, the IBBL chief said they do not plan to take immediate action against the junior officials, which could destabilise the bank during its rebound.
"But senior officials who were involved have already been removed and all responsible parties will be dealt with according to the law. No one will escape accountability, and no wrongful removals will occur either," he said.
The IBBL chairman, however, placed a roadmap for rebuilding the shariah-based bank, which will be implemented in three phases.
In the first phase (from now until December 31), they will focus on recovery. In the second step in a time span between 2026 and 2027, the bank will mark a turnaround while the bank will mark the third phase (from 2027 to 2029) as the time for moving the bank forward.
The S. Alam Group reportedly took control of the IBBL forcibly in 2017. Since then, the bank had been losing its shine following reports of massive loan-related irregularities and its balance sheet continued weakening.
This corporate also took control of some other banks and businesses during the reign of the Awami League government, deposed last month through a student-mass uprising.
The owner and his family members are now in the wilderness, facing inquiries and expropriation of acquisitions and wealth in a change of fortune.