BB appoints observers in IBBL, FSIBL

The Bangladesh Bank (BB) has appointed observers in the Islami Bank Bangladesh Limited (IBBL) and First Security Islami Bank Limited (FSIBL).

The central bank on Monday issued two separate letters to IBBL and FSIBL in this regard, said senior BB officials.

Abul Kalam, director of the Forex Reserve and Treasury Management Department, was appointed as the observer at IBBL and Motasem Billah, director of the Payment System Department, was appointed as the observer at FSIBL.

BB officials said the recent loan irregularities in these banks have prompted the central bank to appoint observers for close monitoring.

Back in 2010, BB had appointed an observer — a watchdog system to closely monitor banks that show signs of poor financial health, suspicious activities or irregularities — at IBBL as it was facing allegations of involvement in militant financing.

Ten years later, in March 2020, the regulator had suddenly withdrawn its observer from IBBL. The withdrawal of an observer should indicate that a bank is in good health, but the reality is quite different for IBBL.

IBBL got mired in controversy after some documents and media reports alleged that the bank approved Tk 9,135 crore in loans to 11 ghost and obscure companies.

However, following a recent government directive, BB asked the bank to suspend the disbursement of the loans to those companies until further notice.

Meanwhile, FSIBL has also faced loan irregularities in recent times. On June 23 this year, the bank — in its 246th board meeting — had approved Tk 1,200 crore in loans (both funded and non-funded) to several obscure business groups.

Chattogram-based business entity S Alam Group has stakes in both of these Shariah-based banks and representatives on their boards.

Including IBBL and FSIBL, nine banks now have BB observers. The others are Sonali Bank, Janata Bank, Rupali Bank, Agrani Bank, Basic Bank, One Bank and ICB Islamic Bank.