BB imposes lending limits on S Alam's six banks

The Bangladesh Bank has imposed lending limits on six banks owned by the controversial S Alam Group, requiring them to obtain central bank approval before granting any loan exceeding Tk5 crore.

Also, overdue loans or those exceeding the credit limit cannot be renewed without cash recovery, as outlined in a letter sent to these banks today.

The banks are Islami Bank Bangladesh, Social Islami Bank, First Security Islami Bank, Union Bank, Global Islami Bank, and Bangladesh Commerce Bank, according to Bangladesh Bank spokesperson Md Mezbaul Haque, who spoke to The Business Standard.

Previously, a similar restriction was placed on the National Bank, a private-sector institution.

The central bank's decision comes at a time when Islami banks are grappling with a severe liquidity shortage, partly due to extensive borrowing by entities owned by the S Alam Group.

The letter from the central bank states that, with the exceptions of agricultural investment, working capital, investment in the CMSME sector, investment payable under incentive packages, Secured Overdraft (SOD) against Fixed Deposit Receipts (FDRs) held in the bank, and Import Letters of Credit (LCs) against 100% cash margin, investment cannot be made in any other sector.

Also, if loans are more than Tk5 crore, approval from the central bank will be required, it said.

"The customers' existing investment facility cannot be renewed or extended without cashing out the overdue balance," reads the letter.

"No existing investment in another bank or financial institution can be acquired," it adds.

Besides, the letter also directed to submit information on investment realisation of the top 20 investors of the banks to the central bank on a monthly basis.