Observers appointed to Islami Bank, First Security Islami Bank

The central bank on Monday dispatched observers to Islami Bank and First Security Islami Bank amid reports of lending anomalies.

Bangladesh Bank's Forex Reserve and Treasury Management Department Director Abul Kalam will serve as the observer to Islami Bank, while Payment Systems Department Director Motasim Billah will serve the post at First Security Islami Bank, said central bank spokesperson Mezbaul Haque.

He said the newly appointed observers will now attend the meetings of the board, executive and audit committees of the two private banks. Subsequently, they will update the central bank about the meetings.

If the financial health of a bank worsens or is at risk of worsening, the central bank can appoint an observer to that bank as per the Bank Company Act.

Three Islamic banks made headlines for allegedly giving a large loan to a private company in August this year. According to several media reports, there had also been numerous lending anomalies by the banks in the last three months, involving several thousands of crores of taka.

The media reports put the banks in the spotlight as the Bangladesh Bank initiated a probe. A three-member probe committee was formed. The team has already completed four rounds of visits to Islami Bank.

In 2010, an observer was appointed to the Islami Bank for the first time in the wake of banking irregularities. In 2017, the popular private bank witnessed a major ownership change. From 2020, there had been no central bank observer to the bank.

With the latest move of the Bangladesh Bank, nine public and private banks now have central bank-appointed observers. The banks are state-owned Sonali, Janata, Agrani, Rupali and BASIC Bank, and private One Bank, ICB Islami Bank, Islami Bank and First Security Islami Bank.