The reconstituted board of Social Islami Bank has introduced a series of strategic measures, prioritising the resolution to address the ongoing liquidity constraints as quickly as possible, said bank Chairman M. Sadiqul Islam.
"Addressing the liquidity problem is our top priority," he said while sharing his future business plans in an exclusive interview with the Financial Express (FE) recently ahead of the bank's 29th founding anniversary. The Shariah-based bank celebrated its anniversary on November 22 with the new motto: 'Resilience, Recovery and Rejuvenate'.
As part of its measures, Social Islami Bank has already taken initiatives to reactivate all types of collection accounts to improve the inflow of liquidity, according to the chairman.
The bank is set to reactivate suspended collection accounts with 18 organisations, including DESCO, Titas, Palli Bidyut, BTCL, BRTA, DPDC and WASA.
Additionally, Social Islami Bank has taken steps to ensure immediate payment against inward remittances and export proceeds to restore customers' confidence. "We'll be working to resolve the ongoing liquidity crunch in the next one or two months by enhancing cash flow," Dr. Islam continued.
He added that Social Islami Bank is working to fully resume its letter of credit (LC) operations, which will further help boost cash flow. The chairman assured depositors that their funds are safe, emphasising that the bank remains committed to delivering the best services, driven by their trust and support.
The Bangladesh Bank dissolved the S Alam Group-dominated board of Social Islami Bank along with 10 other banks, and formed a new board following the fall of Sheikh Hasina-led Awami League government on August 5.
Dr. Islam, a professor at the Department of Finance at the University of Dhaka, was appointed as an independent director and chairman of the new board. Professor Islam holds an M.Com in finance from the University of Dhaka, an MBA from the University of Saskatchewan, Canada, and a PhD in finance from the Athens University of Economics and Business, Greece.
"The S Alam Group-dominated board did not manage the investment-deposit ratio (IDR) effectively, which has led to the bank facing a liquidity crunch," the chairman explained.
Social Islami Bank is now maintaining more than 100 per cent IDR against 92 per cent of regulatory limit, he said, adding that increased IDR means higher investment than deposit.
The central bank had earlier set the safe limit for credit-deposit ratio (CDR) at 87 per cent for conventional banks and the IDR at 92 per cent for Shariah-based Islamic banks.
The board is now working to improve their financial health by intensifying recovery efforts and strengthening deposit mobilization, according to the chairman.
"We have already been able to recover nearly Tk 15.63 billion from August 5 to November 20," the bank's chairman said, adding that they are now identifying wilful defaulters and taking necessary action against them.
"In most cases, we've already communicated with the borrowers directly or indirectly to recover the loans," Dr. Islam said while replying to a query.
Chattogram-based S Alam Group has taken out a Tk 68 billion loan from Social Islami Bank, the chairman said, adding that the loan is still in regular status.
Officials of S Alam Group have already informed Social Islami Bank that they will submit a repayment plan for their loans, according to the chairman.
"We'll honour their plan in compliance with relevant rules and regulations," Dr. Islam said while replying to another query.
He reiterated the government's policy of not shutting down any companies, regardless of their ownership, highlighting that the investments and jobs generated by these entities are vital for the economy.
On the other hand, Social Islami Bank has already suspended disbursement of fresh investments aiming to improve its financial health.
"Currently, our customers are receiving limited working capital to run their ongoing business," the chairman said, adding that there is no scope to provide additional funds to the clients considering the existing liquidity situation.
The chairman also expressed the hope that fresh investment will resume within six months once the IDR decreases to 92 per cent from its current level.
Dr. Islam also spoke on different issues like good governance, internal control and compliance, human resources and the existing banking companies act.
He added that Social Islami Bank plans to adopt an investment strategy focused on SMEs and micro-financing, noting that their repayment behaviour is generally better than that of large businesses.
"We'll also enhance our agent banking operations aiming to bring more unbanked population into the banking network, which will support and strengthen the ongoing financial inclusion initiatives across the country," the chairman said.
A Qualified Cost and Management Accountant and a Fellow of the Institute of Cost and Management Accountants of Bangladesh, Dr. Islam is also the Director of the Center for Corporate Governance and Finance Studies at the University of Dhaka, and a life member of the Finance Alumni Association, of the same university. His scholarly contribution includes numerous research monographs, articles, working papers and case studies.
Currently, Social Islami Bank is running businesses with 180 branches, 236 sub-branches, 374 agent banking outlets, and 224 ATM booths located at both urban and rural areas of Bangladesh.
The Shariah-based bank's campaign titled "Building a Stronger Tomorrow" runs from November 3 to December 20 aiming to increase deposits and strengthen recovery initiatives.
Founded in 1995, Social Islami Bank introduced three-tier banking model -- formal, non-formal and voluntary -- for the first time in Bangladesh aiming to bring a new dynamism in welfare banking targeting eradication of poverty with a motto of 'Working Together for a Caring Society'.
siddique.islam@gmail.com