Al-Arafah Bank returns to founder directors, but KDS influence sparks fresh debate 

Bangladesh Bank has returned the management of Al-Arafah Islami Bank PLC to its founder-directors after nearly two years of central bank oversight, citing improvements in the bank's financial condition. However, the reconstituted 14-member Board has already drawn controversy, as seven directors are directly linked to Chattogram-based KDS Group, reviving concerns over the group's continued influence on the bank.

The central bank approved the new board on July 16, replacing the five-member panel of independent directors that had managed the bank since the post-August 2024 restructuring of several private banks.

Bangladesh Bank Executive Director and spokesperson Arif Hossain Khan confirmed the development, saying the bank's financial health had improved to return control to its original entrepreneurs.

"We dissolved the Boards of 16 banks. Among them, Al-Arafah Islami Bank has shown notable financial improvement. Therefore, responsibility has been handed back to its experienced entrepreneur-directors," he said after reconstituting the Board.

KDS-linked directors dominate the new Board
Half of the newly approved Board comprises individuals associated with KDS Group. They include KDS Group Chairman Khalilur Rahman; Mahbub Ahmed, representative director of KDS 
Garments; Farid Uddin Ahmed, representative of KDS Textile; former chairman Badiur Rahman, a relative of KDS Chairman Khalilur Rahman's younger brother Ahmedul Haque; KDS Managing Director Selim Rahman; and Sharif Uddin Taslim, representative director of KY Steel, one of KDS Group's major affiliated companies.

The remaining directors are Hafez Enayet Ullah, Rafiqul Islam, Imadur Rahman, Nazmul Ahsan Khaled, Anwar Hossain, Abdus Salam and Liaquat Ali Chowdhury. Among them, Anwar Hossain has previously been accused by critics of assisting KDS Group and S Alam Group in taking control of the bank in 2009 during the Awami League government.

Return of founder-directors after central bank oversight
Following the political transition in 2024, Bangladesh Bank dissolved the bank's previous Board and appointed five independent directors led by Khwaja Shahriar as chairman. The other directors were Md Shahin Ul Islam, Md Abdul Wadud, M Abu Yusuf and Mohammad Ashraful Hasan.

New Chairman vows to restore the bank
Badiur Rahman, who has returned as chairman, described his appointment as another opportunity to lead the bank through difficult times. "I assumed the chairmanship under Bangladesh Bank's observation in 2008 as well. With everyone's support, we successfully overcame crisis and placed the bank on a path of growth. I have again been entrusted with responsibility during a challenging period in 2026. With the cooperation of all stakeholders, I am confident Al-Arafah Islami Bank will soon regain its strength and reputation," he said.

Bangladesh Bank cites positive audit findings
According to Bangladesh Bank sources, the decision to return the bank to founder directors followed nearly two years of supervision, financial assessment and audits, including reviews by international audit firm KPMG. The evaluations reportedly found no major deterioration in asset quality, no evidence of significant investment fraud and no proof that the bank had come under complete control of any single business group.

Officials also noted that despite adverse circumstances, the bank avoided any liquidity crisis and continued meeting depositor obligations, distinguishing it from several other troubled banks.

Among the 12 banks whose Boards had been dissolved during the interim government, Al-Arafah Islami Bank is the only institution so far where founder-directors have been reinstated.

Bangladesh Bank also said the new Board was formed after reviewing the bank's 30-year history, assessing which entrepreneurs had contributed positively to its growth, remained free from major controversy and had demonstrated leadership during previous crises. The central bank also examined whether any founder-directors had previously been unfairly excluded from the Board.

Historical disputes over control
Founded in 1995 by noted Islamic scholar and former secretary AZM Shamsul Alam with the objective of promoting Shariah-based banking and social welfare, Al-Arafah Islami Bank has long been regarded as one of country's leading Islamic commercial banks.

Supporters of the new Board argue that founder-directors collectively managed the bank without major political conflicts for decades. They also contend that although S Alam Group founder Saiful Alam was associated with the bank from its early years, the presence of several influential entrepreneurs prevented any single group from exercising absolute control.

Critics, however, present a different narrative. They allege that after Awami League came to power in 2009, KDS Group, S Alam Group and their associates forcibly removed several original directors and restructured the Board. Badiur Rahman served as chairman from 2009 to 2016 and remained a Board member until 2023. During that period, opponents allege that political patronage, nepotism and governance failures exposed the bank to financial risks, allegations that supporters rejct.

Performance under previous leadership
Former senior executives of the bank credit Badiur Rahman's earlier tenure with stabilising the institution after severe challenges in 2007.

According to bank data, profit growth improved from negative 22 percent in 2007 to positive 13 percent in 2009, reached 34 percent in 2011 and stood at 18 percent in 2016.

During the same period, deposits increased from Tk 2,969 crore to Tk 19,970 crore, investments rose from Tk 2,972 crore to Tk 19,651 crore, import business expanded from Tk 3,268 crore to Tk 11,878 crore, exports grew from Tk 2,017 crore to Tk 8,815 crore, and the branch network increased from 50 to 140 branches.

While Bangladesh Bank maintains that the Board has been constituted based on experience, governance record and long-term contribution to the institution, the significant representation of KDS Group has reignited debate over whether the bank has genuinely returned to its original founders or whether influential business interests continue to dominate its governance.

While contacted over phone none of the bank agreed to comment on the matter. Preferring anonymity, a relevant senior official of the bank, however, claimed that separate proposals of two Boards were submitted to the central bank for its approval. But, the central bank granted one.

"However, the central bank is working to incorporate the representatives of other parts in the Board excluding some new directors. A director has already been removed from the board. Now, a director from other part will be included there," he informed.