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BB summons Islami Bank MD over loan irregularities

An inspection team starts inquiry on IBBL
Mehedi Hasan
28 Nov 2022 20:48:13 | Update: 28 Nov 2022 22:05:33
BB summons Islami Bank MD over loan irregularities

The Bangladesh Bank on Monday summoned Islami Bank Bangladesh Ltd (IBBL) Managing Director Mohammed Monirul Moula, seeking his explanation regarding the alleged lending irregularities.

The IBBL MD met the central bank governor on Monday evening, said central bank Executive Director and spokesperson Abul Kalam Azad. Earlier the same day, an inspection team of the regulator visited the bank to inquire about the alleged lending irregularities.

The Bangladesh Bank is taking the IBBL issue seriously because the Finance Ministry’s Banking and Finance Division had instructed the regulator to inquire about the issue, said a senior official of the central bank seeking anonymity.

Before the move, Prime Minister Sheikh Hasina on Sunday had instructed the Banking and Finance Division to inform her about the current situation of the banking sector. The official said the IBBL managing director is likely to be sacked over lending irregularities.

The Business Post tried to reach IBBL Managing Director Mohammed Monirul Moula over phone for his comments on the matter, but he could not be reached till the filing of this report.

Several media organisations, including the Business Post, had recently published reports mentioning loans worth several thousands of crores of taka provided to ghost and obscure companies.

On June 5 this year, the Islami Bank Bangladesh Ltd (IBBL) – in their 1,970th executive committee meeting – approved at Tk950 crore as loans to new client Nabil Grain Crops Ltd, to be disbursed from the bank’s Gulshan branch.

During that period, the company had only Tk 8.5 lakh exposure in several banks and non-bank financial institutions, according to their Credit Information Bureau (CIB) report.

Nabil Grain Crops Ltd belongs to the marginal category (new company) as per the Internal Credit Risk Rating System (ICRRS), said the Bangladesh Bank in its observation report.

Central bank officials say the IBBL should have taken at least Tk 230 crore as collateral, including Tk 110 crore as deposits, from the company. As such safeguards are not mandatory under the easy loan condition, the loans are very risky.

The IBBL Rajshahi branch approved Tk 3,100 crore as loans to a number of Nabil Group companies, including Tk 700 crore to Nabil Feed Mills Ltd in June.

In the meeting minutes, the bank claimed that Nabil Feed Mills Ltd and Nabil Grain Crops Ltd are not companies of the same group. However, the central bank suspects that both those companies belong to the Nabil Group.

If this is the case, then the IBBL has exceeded the single borrower exposure limit, which is a violation of The Bank Company Act, mentions the central bank’s observation report.