Parliamentary body asks regulators to remain alert to save Islami Bank

FT ONLINE

The Parliamentary Standing Committee on the Finance Ministry recently recommended that regulators be vigilant in order to save Islami Bank Bangladesh Ltd (IBBL) from any kind of financial disaster, according to a handout from the Parliament Secretariat.

The parliamentary watchdog made the recommendation in its 24th meeting, asking the central bank to investigate aggressive lending by IBBL after the reshuffle in its board of directors last year.

Committee Chairman Dr Md Abdur Razzak presided over the meeting at Jatiya Sangsad Bhaban.

Committee members Najmul Hasan, Mostafizur Rahman Chowdhury, Md Abdul Wadud, Farhad Hossain, and Akhter Jahan were also in attendance.

Earlier, in its 21st meeting on October 29, 2017, the committee had asked the then governing body of IBBL to inform it on the details of loans it had been approving, as the bank’s disbursement of credit had risen alarmingly. The liquidity crisis eventually led to the departure of then IBBL chairman Arastoo Khan on April 17.

According to sources at IBBL, the liquidity crisis was induced by a mix of aggressive lending and a decline in deposits last year.

The bank’s deposits amounted to over Tk80,000 crore in January 2017, but have reduced drastically to around Tk76,000 crore currently. The bank has disbursed total credit of around Tk67,000 crore as of now and its capital stands at just Tk6,000 crore.

Sources at Bangladesh Bank said the IBBL has crossed the permissible limit of 90% advance-deposit ratio (ADR) set by the central bank. Its ADR is now at above 92%, and the bank has also withdrawn a large sum of money from treasury bonds.

At the meeting, the parliamentary committee also discussed impediments to the implementation of the national budget, equalization of salaries of employees at the same level, and delays in the handover of matured cheques to clients by different insurance companies.