Bangladesh Bank has announced new lending restrictions affecting six banks associated with the S Alam Group, requiring these institutions to secure central bank approval for any loans exceeding Tk5 crore. The directive, outlined in a letter sent today, also prohibits the renewal of overdue loans or those surpassing credit limits without full repayment.
The banks impacted by this decision are Islami Bank Bangladesh, Social Islami Bank, First Security Islami Bank, Union Bank, Global Islami Bank, and Bangladesh Commerce Bank. This move follows a similar restriction imposed on National Bank, a private-sector entity, earlier. The central bank’s decision comes amidst significant liquidity issues facing Islami banks, partly attributed to the extensive borrowing activities by S Alam Group entities. The new rules stipulate that investments by these banks are restricted to agriculture, working capital, the CMSME sector, incentive packages, secured overdrafts against fixed deposits, and import letters of credit with a 100% cash margin.
Under the new regulations, loans above Tk5 crore require prior approval from the central bank. Additionally, existing loans cannot be renewed or extended unless overdue balances are settled, and the banks are barred from acquiring investments from other financial institutions. The letter also requires the banks to provide monthly reports on the investment realizations of their top 20 investors. The central bank’s actions are part of a broader effort to stabilize the financial sector and address liquidity concerns that have emerged due to the S Alam Group’s borrowing practices.
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