A Bangladesh Bank investigation has found irregularities in sanctioning loans worth Tk 400 crore by Islami Bank Bangladesh Limited (IBBL) to an entity and one individual for purchasing commercial floor space worth around Tk 400 crore at the Jamuna Future Park in capital Dhaka.
The central bank (BB) has found that the investment decision made by IBBL was a complete deviation from banking rules and due diligence, BB sources said.
The irregularities came to the BB’s knowledge when Islami Bank sanctioned Tk 400 crore in loans for Rongdhanu Builders Private Limited, which is owned by Md Rafiqul Islam, also a former director of scam-hit Farmers Bank (renamed as Padma Bank), and for his brother Md Mizanur Rahman this year.
IBBL issued the investment facility (hire purchase under Shirkatul Melk) worth Tk 200 crore to Rongdhanu Builders for purchasing 50,979.54 square feet of commercial space at the Jamuna Future Park. The space can house 37 shops at the mall.
The bank gave Mizanur Tk 200 crore in investment facility for purchasing 49,020.46 square feet of commercial space at the mall. The space can house 32 shops.
Despite being a beneficiary of IBBL’s credit facility in purchasing floor space, Rafiqul gave guarantee to the Tk 200-crore investment facility issued to his brother, Mizanur.
The central bank also found that the probable income from the floor space would not be sufficient for repayment of monthly instalments against the loans.
The BB investigation found that the bank’s decision to award the investment facility to Mizanur was also irrational considering his business and income.
As per the information available at Registrar of Joint Stock Companies and Firms, the initial paid-up capital of Rongdhanu Builders Private Limited was Tk 1 lakh till December last year since its formation in 2008.
The paid-up capital of the entity was raised by Tk 4.99 crore to Tk 5 crore in December, 2018, few months before the issuance of credit facility by IBBL.
Apart from the credit facility worth Tk 200 crore from IBBL, Rongdhanu Builders with just Tk 5-crore paid-up capital has been enjoying another Tk 285 crore in credit facility from Social Islami Bank Limited.
Asked about the central bank’s observation that the returns from the shops might not be sufficient for the instalment payment, Rafiqul disagreed with the BB finding stating that he ‘does not think that the instalment payment would be a problem with the earnings from the shops’.
He mentioned that he would be able to earn around Tk 4 crore a month from the shop rents. He, however, denied making any further comment on the issue.
Before the issuance of loans to Rongdhanu Builders and Mizanur, IBBL in October last year issued credit facility worth Tk 1,025 crore to Adil Corporation, an entity owned by Mostan Billah Adil, and to Sadia Traders, an entity owned by Mostan’s wife Sadia Jamil, against mortgage of the same Jamuna Future Park floor space Rongdhanu Builders and Mizanur were given loans to purchase. The entities mortgaged others assets also to receive the loans.
IBBL sanctioned the credit facility in favour of the entities in just six days of opening accounts with the bank by the firms.
Registration of the two companies could not be found in the RJSCF records.
Based on the findings, BB in April this year issued a letter to IBBL managing director Md Mahbub-ul-Alam asking the bank how any property mortgaged to a bank could be allowed to be sold to another with the credit facility of the same bank given that the entire loan amount remained unpaid.
Although the central bank asked IBBL to reply to its notice in three days, the private commercial bank took more than two months to respond to it.
Sources said that Adil Corporation and Sadia Traders gave another asset as mortgage to IBBL, replacing the floor space at the Jamuna Future Park following the objection raised by the central bank.
Although IBBL top officials were visited and contacted over e-mails through its public relation wing for comment on the issue several times since June 24, the entity is yet to make any official statement in this regard.
SIBL managing director and chief executive officer Quazi Osman Ali also could not be reached for his comment.
In late 2016 and early 2017, S Alam Group bought a significant amount of shares of IBBL through a number of companies and virtually took control of the bank.
The bank has been mired in crisis and controversies since the takeover by the Group.
Apart from IBBL, S Alam Group has control over Social Islami Bank, First Security Islami Bank, Al-Arafah Islami Bank, Union Bank, Bangladesh Commerce Bank and NRB Global Bank.
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