The biggest private bank in the country, Islami Bank Bangladesh Limited (IBBL), which once had over Tk80,000 crore in deposits, is in the midst of a liquidity crisis and the sudden departure of its chairman Arastoo Khan has drawn further attention to the bank’s woes.
According to sources at IBBL, the liquidity crisis was induced by a mix of aggressive lending and a decline in deposits last year.
Over the past four months the fact that the bank has been running out of money to lend has become very apparent. According to sources, the bank’s deposits amounted to over Tk80,000 crore in January 2017 but have drastically dropped to around Tk76,000 crore now. The bank has disbursed total credit of around Tk67,000 crore as of now and its capital stands at just Tk6,000 crore.
[caption id="attachment_259884" align="alignleft" width="300"] Newly appointed IBBL Chairman Prof Nazmul Hasan
Sources at Bangladesh Bank said the IBBL has crossed the permissible limit of 90% advance-deposit ratio (ADR) set by the central bank. Its ADR is above 92% now.
According to sources at IBBL, this was due to the liquidity crisis and explains why the bank is unable to give large-scale loans.
An IBBL director seeking anonymity told the Dhaka Tribune: “The bank is out of fresh money to lend. The crisis is so deep that the bank has failed to sanction a loan proposal for Tk800 crore sought by one of the most influential shareholders of the bank. And the failure to give large-scale loans led to the recent changeovers at the bank.”
Following the failure, the bank removed five top officials of the bank on April 5 - Additional Managing Director Md Shamsuzzaman, Deputy Managing Directors Md Habibur Rahman Bhuiyan, Abdus Sadek Bhuiyan, and Md Mohon Miah, and Senior Executive Vice-president Amirul Islam.
One of the recently sacked officials seeking anonymity told the Dhaka Tribune: “We were being forced to sanction the Tk800 crore loan by breaching relevant rules and regulations, even though the loan proposal was inappropriate and the collateral was inadequate.
“When we disagreed with the decision, we were fired.”
However, the bank authorities claimed the officials were “not sacked but had voluntarily resigned.”
Consequently, another “dramatic” turn of events happened on Tuesday, said another director at the bank requesting to be unnamed.
The chairman of the board of directors at IBBL Arastoo Khan “stepped down” from his post, while Prof Nazmul Hasan, a teacher of Dhaka University replaced him overnight.
The board also accepted the resignation of the chairman of Islami Bank Foundation (IBF) Syed Manjurul Islam, who was also a director at the bank.
Both Arastoo Khan and Syed Manjurul Islam are former secretaries and were nominated to the board as directors by Armada Spinning Mills, one of the sponsors of the IBBL.
Prof Nazmul Hasan was also nominated as chairman by Armada Spinning Mills.
The bank’s board also made changes to the executive committee and risk management committee on the same day.
Chittagong University Prof Selim Uddin, also the chairman of Bangladesh House Building Finance Corporation (BHBFC) was made the executive committee chairman replacing Maj Gen (Retd) Abdul Matin, who was also made the bank’s risk management committee chairman.
When contacted, Arastoo Khan said he resigned from the post on personal grounds as he wants to spend more time with his family. “It was tough for me to give time to my family because of the heavy workload at the bank,” he told the Dhaka Tribune.
Arastoo Khan was made chairman of the IBBL on January 5 last year at a board meeting of the bank immediately after the removal of the then chairman Mostafa Anwar.
The then managing director of the bank Abdul Mannan and vice-chairman Azizul Haque were also forced to resign from the bank at the same meeting then.
Another director at IBBL, who is very close to the bank’s influential shareholders said, the bank might see more changes within a short period of time.
“The existing managing director will be replaced any moment now.”