Bangladesh Bank injects Tk 25b into troubled banks

The S Alam Group, which had close ties with the ousted Awami League government under Sheikh Hasina, allegedly embezzled funds from First Security Islami Bank and Social Islami Bank. Mohammad Saiful Alam (S Alam) served as chairman of First Security Islami Bank, while his son-in-law Belal Ahmed chaired Social Islami Bank.

Following the fall of the government, depositors of these banks faced difficulties withdrawing their money. In response to the liquidity crisis, Bangladesh Bank has stepped in with financial assistance, approving a Tk 25 billion loan to the two struggling banks. The central bank will provide this money by printing new currency, reports Prothom Alo. 

Bangladesh Bank Governor Ahsan H Mansur approved the decision on Thursday, as confirmed by central bank sources. When asked about the matter, Assistant Spokesperson Mohammad Shahriar Siddiqui told Prothom Alo, “The two banks were facing liquidity problems and applied for assistance a few days ago. Their request was approved on Thursday, allowing them to receive a Tk 25 billion loan.” However, he could not specify how long such monetary support would continue through money printing.

Bangladesh Bank will provide liquidity support of Tk 15 billion to Social Islami Bank and Tk 10 billion to First Security Islami Bank, according to a central bank source. With this new allocation, the total liquidity support extended to banks during the tenure of the current governor will reach Tk 294.10 billion.

Of this amount, Social Islami Bank has received Tk 55 billion, while First Security Islami Bank has received Tk 65 billion. Additionally, Tk 50 billion has been provided to National Bank, Tk 20 billion to Union Bank, Tk 2 billion to Bangladesh Commerce Bank, Tk 100 million to ICB Islami Bank, Tk 20 billion to Global Islami Bank, Tk 85 billion to Exim Bank, and Tk 2 billion to AB Bank.

Concerns over liquidity issues in several banks linked to the S Alam Group emerged in late 2022 following reports of loan irregularities. In response, Bangladesh Bank began injecting funds into these banks by printing money. However, lending was halted after the fall of the previous government, and changes were made to the boards of directors. Following these restructuring efforts, liquidity support resumed.

An official from Bangladesh Bank told Prothom Alo that banks are facing heightened withdrawal pressure ahead of Eid, necessitating these emergency funds. “If we don’t provide money, the pressure to withdraw cash could spread to other banks,” the official said.

The central bank has confirmed that the allocated funds must be used exclusively to ensure depositors‍‍` withdrawals and cannot be utilised for any other purpose.