Fearful depositors rush to pull out from IBBL

Sohel Rana, a private sector employee, has been saving up with the Islami Bank Bangladesh Ltd (IBBL), and his Mudaraba Term Deposit Account was set to mature in 2024.

After learning about the bank’s recent loan irregularities, Rana felt very concerned about his hard earned money, and prematurely encashed the deposit account last Thursday.

Rokeya Rahman, a SME entrepreneur in Dhaka too had to clean out her term deposit from the IBBL because she panicked that she would not get her money back, after the Shariah based bank became mired in controversy.

Sohel Rana and Rokeya Rahman are not isolated cases, as a rising number of depositors have been withdrawing their money from this bank throughout this November, show latest data from the IBBL.

The Business Post, on a recent visit to different IBBL branches in Gulshan, Motijheel and other areas of Dhaka, witnessed firsthand the rush of panicked depositors lining up to take their money out.

The recent trend of encashment has severely impacted the IBBL deposits, which dipped to Tk 1,50,372.7crore at the end of November this year, from Tk 1,53,272.0 crore at the end of October, the bank’s data shows.

The figures indicate that the bank’s deposits dropped by Tk 2,900 crore in just a month. The IBBL deposits were at Tk 1,52,860 crore at the end of September of this year, reveals the bank’s quarterly report.

The bank had crossed the milestone of Tk 1,00,000 crore in deposits bank in June 2020, when Covid-19 pandemic struck the country. The bank’s deposits stood at Tk 94,681 crore in 2019.

Investment (or loans) of IBBL, the largest private commercial bank, stood at Tk 1,43,965 crore at the end of September this year, as per the quarterly report. However, a senior official of IBBL seeking anonymity said the bank’s investments or loans actually stands at Tk 1,38,000 crore.

IBBL breaks IDR limit

The bank has already broken its IDR (Investment Deposit Ratio) limit due to the recent aggressive lending activities.

As per regulations, every Shariah-based bank must keep 9.5 per cent of their total deposits with the central bank as Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). After that, a Shariah-based bank is only allowed to loan out 92 per cent of its deposits.

By this formula, IBBL could loan out up to Tk1,38,000 crore from their Tk 1,50,372.7 crore deposits last November, but the bank handed out Tk 1,43,965 crore in loans in September.

The Business Post attempted to reach IBBL Managing Director and CEO Mohammed Monirul Moula over phone and text messages seeking comments on the issue, but he did not respond till the filing of this report.

Loans irregularities of IBBL

IBBL became mired in controversy after a number of IBBL documents and media reports alleged that the bank approved Tk 9,135 crore to 11 ghost and obscure companies.

On June 5 this year, IBBL – in their 1,970th executive committee meeting – approved at Tk 950 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 CIB (Credit Information Bureau) report.

The company 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.

After a recent government directive, the central bank asked the bank to suspend the disbursement of Tk 9,135 crore in loans to those companies until further notice.

At the end of September this year, the non-performing loans of IBBL stood at Tk 4,792 crore, up from Tk 3,525.91crore at the end of December of 2020, shows central bank data.