No companies will face shutdown but action is being taken against individuals at fault to prevent fund diversion, the Bangladesh Bank governor said Monday as he oversaw reclaimed Islami Bank's bail-in package.
The new management of the bank plans to pool around Tk 200 billion by unfreezing seized shares and floating fresh stocks on the bourses to minimize gaps between deposits and investments.
Under the capital-repletion plans, Islami Bank Bangladesh PLC will collect Tk 100 billion through selling its shares seized by the central bank shortly after the fall of the Sheikh Hasina government, its chairman said. These shares were largely held by the controversial S Alam Group.
The remaining Tk 100 billion will be raised through issuing new shares, said newly appointed Islami Bank Chairman Obayed Ullah Al Masud.
He made the disclosure on the bail-in package while speaking at a press conference held at the central bank headquarters in Dhaka. Bangladesh Bank Governor Dr Ahsan H Mansur was present.
At the press conference, the governor highlighted that the now-embroiled S Alam Group had taken 80 per cent of Islami Bank's loans, directly or indirectly, after taking over its ownership in 2017.
"Considering its assets, Islami Bank is larger than 10 other troubled banks combined. Once Islami Bank makes a turnaround, it will create a significant space for the economy to recover," Dr Mansur notes about a domino effect of banking resurrection.
He also said the central bank is taking action against individuals, not companies like S Alam Group, Beximco and others, as these companies are considered national assets.
"Legal action would be taken against the S Alam Group chairman and other officials for their alleged crimes in the banking sector," he asserted.
The governor reaffirmed the post-uprising interim government's policy of not shutting down companies, regardless of ownership, as investments and employment generated by these entities are vital for the economy. "We're trying to prevent fund diversion."
He also notes that all these industries contribute to economic growth, so the central bank is focused on ensuring the productive sector continues to operate smoothly.
Elaborating on the bank's recapitalization plans, the chairman said, "We're working to sell 1600 crore (16 billion) shares, which belonged to S Alam Group earlier, at current market price of each share at Tk 60 by January 2025 to mange around Tk 100 billion."
The rest Tk 100 billion will be raised by issuing fresh shares of the Shariah-based bank after obtaining permission from the regulators-both the Bangladesh Bank (BB) and the Bangladesh Securities and Exchange Commission (BSEC), according to the chairman.
"We're now planning to visit Middle-Eastern countries, including the Kingdom of Saudi Arabia (KSA), to approach former shareholders like Al Rajhi Group and Islamic Development Bank (IDB) and invite them to invest in it again within January," Mr. Masud told the reporters.
He also said: "We'll also talk with the International Finance Corporation (IFC) on the same grounds. And local good entrepreneurs will be allowed to invest in the bank."
The chairman also spoke on different issues like deposit mobilization, strengthening collection of inward remittances, resuming operation of automated teller machine (ATM) booths and real-time gross settlement (RTGS) and latest financial health of the bank.
"Our deficit in the current accounts maintained with the central bank has improved slightly in recent months," Mr. Masud said while replying to a query.
Deficit in the current account of Islami Bank maintained with the BB came down to Tk 20 billion from Tk 23 billion earlier, according to the chairman.
He also said efforts have also been made to recover the bank's assets from companies linked to S Alam Group using different mechanisms, including opening letters of credit (LCs) with a 100-percent margin requirement."Individual S Alam and S Alam Limited are separate entities," the chairman said in reply to another query.
Islami Bank has been able to collect Tk 49.72 billion as fresh deposits in last four months, he said, adding that its deposit stock is now Tk 1580 billion. It was Tk 1530 billion earlier.
He also said S Alam Group had taken Tk 800 billion through direct or indirect loans with 45 accounts from 17 branches of this bank alone.
"S Alam Group had not only taken out the large amount of money from the bank, they had tarnished the bank's correspondence relationships with foreign banks," Mr. Masud noted.
The chairman expressed optimism about Islami Bank's future, saying that the bank will be stronger than before within the next two years.
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