5 Islamic banks at risk of being frozen out of transactions

The Bangladesh Bank has told five cash-strapped Shariah-based lenders to adjust the deficit in their current account balance by December 26 or else be blocked out of all clearing platforms.

Banks have to maintain a current account with the central bank for different clearing payment systems and they have to maintain a hefty balance in the account.

But the current accounts of Islami Bank, Social Islami Bank, First Security Islami Bank, Union Bank and Global Islami Bank have been in the deficit for the past year, The Daily Star has learnt from officials informed with the proceedings.

Then on November 28, the central bank sent letters to the managing directors of the five banks -- where Chattogram-based conglomerate S Alam Group holds significant stakes -- instructing them to clear the deficit within 20 working days.

"A review of your current account balance shows that it has been in the deficit for a long time and that is not consistent with normal banking activities. Although you have been repeatedly warned about the matter, no significant action has been taken by you until now," read the letter seen by The Daily Star.

The banks will be barred from all or any specific clearing platform in accordance with the agreement with the payment system department of the central bank for failure to adjust the deficit within the stipulated time, it added.

If the central bank bars the lenders from the national clearing system, they will be rendered invalid as they would not be able to conduct any interbank transactions, according to bank MDs, who spoke with The Daily Star on the condition of anonymity to explain the significance of the letter.

Syed Habib Hasnat, the MD of Global Islami Bank, acknowledged the receipt of the letter.

The current account of Global Islami Bank -- whose vice-chairperson Maimuna Khanam is the daughter of Mohammad Saiful Alam, chairman of S Alam Group -- maintained with the central bank is in the surplus, according to Hasnat.

"Now that there is a crisis in the overall banking sector, we are also in crisis," Hasnat said, adding that the bank purchased bonds to meet the deficit.

Despite repeated attempts over the phone, The Daily Star could not reach Mohammed Monirul Moula, managing director of Islami Bank, whose chairman Ahsanul Alam is the elder son of the S Alam Group chairman.

The correspondent yesterday paid a visit to the head office of Islami Bank and Moula walked out of the room right away.

Zafar Alam, the MD of Social Islami Bank, did not respond to the correspondent's request for comment yesterday. However, on December 4 he told The Daily Star that the bank's liquidity situation is improving gradually.

"We did not need the central bank liquidity support in the last one week," he had said.

The Daily Star could not reach ABM Mokammel Hoque Chowdhury, the MD of Union Bank, and Syed Waseque Md Ali, the MD of First Security Islami Bank.

The S Alam Group chairman Alam is the chairman of First Security Islami Bank, while his wife Farzana Parveen is a director along with three other relatives.

Alam's son-in-law Belal Ahmed is the chairman of Social Islami Bank, while his sister Jebunnesa Akbar and nephews Arshadul Alam and Mahmudul Alam sit on the board.

The board of Union Bank consists of Alam's brothers Osman Goni and Md. Rashedul Alam along with other family members.

The S Alam Group directors Shahidul Alam, Shahana Ferdous and Farzana Begum sit on the board of Global Islami Bank along with five other relatives.

Bangladesh Bank Executive Director and spokesperson Md Mezbaul Haque acknowledged the liquidity support to the Islamic banks.

This is an accepted rule to help them, he told The Daily Star. "The central bank is providing the liquidity support to those lenders for the interest of the banking sector."