The Bangladesh Bank (BB) has identified fresh irregularities in loan disbursements at Islami Bank Bangladesh, despite a recent restructuring of its board of directors following the ousting of the Sheikh Hasina-led government in August last year.
An investigation by the central bank revealed that Abdul Jalil, the independent director and chairman of the executive committee of Islami Bank, was involved in these irregularities.
On 12 January, the banking regulator instructed the bank’s chairman to provide an explanation within five working days.
As per the central bank's inspection report, Islami Bank must now seek prior approval from the BB for any loan disbursements exceeding Tk5 crore.
However, on 10 December last year, the bank’s executive committee approved the rescheduling of a Tk210 crore loan and sanctioned a fresh Tk40 crore working capital loan for TRU Fabrics Ltd without obtaining the required central bank approval.
The investigation reviewed the relevant executive committee memo, which indicated that these loan proposals were presented and approved without adhering to the mandated regulatory procedures.
BB report held Abdul Jalil accountable for these irregularities.
The report further disclosed that Jalil had previously served as a finance advisor for TRU Fabrics Ltd and its affiliate, Unifill Textile Mills Ltd, for over six years before his appointment to the bank's board.
Despite cancelling the loan rescheduling and approvals on December 23, the fresh funds had already been withdrawn between December 10 and 26 December, a significant violation according to the BB.
The central bank's probe also uncovered other discrepancies, including the allocation of loans to one company to settle the debts of another, and TRU Fabrics Ltd receiving Tk10.19 crore beyond its exposure limit.
The report highlighted that Islami Bank failed to conduct on-site inspections of the company’s goods as per the Guidelines on Credit Risk Management, and did not adequately assess the company’s repayment capacity.
Additionally, Jalil was found to have been allocated an office at the bank's head office, contravening a central bank circular.
BB report also noted a conflict of interest as Jalil appointed a relative to a subsidiary of the bank.
Abdul Jalil stated that the board of directors, not just himself, had approved the loans.
He dismissed the allegations of irregularities, asserting that the company in question was a long-standing client of the bank; adding that the matter was now under review by the board and that the bank was preparing its explanation for the central bank.
