Bangladesh Bank reconstituted the board of Al-Arafah Islami Bank on 3rd September to eliminate the influence of the S. Alam Group, a controversial business conglomerate based in Chattogram. However, more than a month later, the bank's previous managing director, appointed by S Alam Group, remains in position.
Additionally, two individuals closely associated with the controversial S. Alam Group and KDS Group are reportedly seeking appointments as additional managing directors, according to discontented bank officials and shareholders.
Officials at Al-Arafah Islami Bank have confirmed that Farman R Chowdhury is still the managing director and CEO of the bank.
Although the new board has taken office, no action has been taken to remove him. Furthermore, the management recently made a policy decision regarding the appointment of two additional managing directors.
It is reported that this decision was made under the advice of Saiful Alam Masud, the head of S. Alam Group, and Khalilur Rahman, leader of KDS Group. Interviews for the positions have already taken place.
Sources indicate that while Saiful Alam Masud has not directly interfered in the bank, the S. Alam and KDS groups have withdrawn substantial sums through his brother. Fearing that the current board might scrutinise these loans, the management appears to be seeking to strengthen the presence of S. Alam and KDS loyalists within the bank. Despite the presence of existing Deputy Managing Directors (DMDs), efforts are underway to appoint additional managing directors loyal to S. Alam.
Insiders caution that appointing external candidates as additional managing directors could lead to unrest among the bank's employees. Interviewing outsiders has already caused resentment among the bank's staff, and there is concern that employees may protest if such appointments are made.
One official questioned the logic behind bringing in external candidates when the bank already has seven DMDs, and pointed out that two of the interviewees are known to be close to the S. Alam Group. Arrangements are reportedly being made to appoint both of them.
Attempts to contact Managing Director Farman R Chowdhury for comment were unsuccessful.
Allegations of irregular loans amounting to Tk 1,217 crore have surfaced across three branches of Al-Arafah Islami Bank, where inadequate security was taken against these loans. The bank approved large loan limits with insufficient collateral.
According to a report by the central bank, Al-Arafah Islami Bank extended Tk 412 crore in loans to Ayman Textile and Hosiery, a client of the Banani branch. There have been allegations of money laundering connected to this loan, which was granted without proper verification and is now in default.
Additionally, the Chattogram Agrabad branch of Al-Arafah Islami Bank was found to have made irregular investments in favour of Chattogram Ispat, H Steel Re-Rolling Mills, and National Iron and Steel Industry. Tk 135.53 crore (including unpaid compensation) from a loan given by Al-Arafah Islami Bank for importing ships from Singapore-based Aerial Maritime Private Limited is now in default. Only Tk 17 crore in collateral was taken against this loan.
It has been revealed that Aerial Maritime Private Limited, the Singapore-based company exporting ships, is owned by Badiur Rahman, the former chairman of Al-Arafah Islami Bank. Investments abroad require permission from the central bank, but Aerial Maritime Private Limited had no such approval.
In 2010, a loan limit of Tk 85 crore was granted against a security of just Tk 8.5 crore. This credit limit was later raised to Tk 669 crore by involving four family-owned companies-JST Commodities, Elham Textile, Unilon Textile, and Tafreed Cotton Mill-through the Jatrabari branch. The land shown as collateral is valued at only Tk 15.16 crore, with no original deeds, additional deeds, or copies provided. A loan limit of Tk 669 crore was approved against collateral worth just Tk 50 crore.
Sources claim that the four companies involved are family businesses linked to Shahabul Islam, the elder son-in-law of Badiur Rahman. However, Rahman maintains that none of his businesses have any loans with banks in Bangladesh.
According to Al-Arafah, the loans are now secured by significant assets, although there was initially no collateral.
