S Alam Group alone has taken around Tk 180 billion in loans from the Union Bank, totalling around 64 per cent of the bank's total loan portfolio. The group resorted to fictitious transactions to take the loans, often without any collateral, according to an audit carried out by the central bank.
Internal documents mentioned that around 42 per cent of loans at the Union Bank are in default, but it officially informed the central bank that its defaulted loans are less than 4 per cent.
The banking sector regulator, Bangladesh Bank, has recently reconstituted the bank’s board of directors as it was grappling with different sorts of financial irregularities as well as financial crisis. Five independent directors have been appointed in the new board to restore order, but the particular business group’s influence remains unabated.
Directors are struggling to grasp the true financial condition, while loan and transaction details of some entities, including the S Alam Group, have been removed from the automated database, said reliable sources.
Against such a backdrop, experts fear that it will be difficult to ascertain the actual picture of the bank’s financial condition.
Central bank officials are struggling to obtain accurate information regarding S Alam Group’s loans and deposits in the Union Bank. It was learnt that its managing director ABM Mokammel Hoque Chowdhury, who has been in the office since 2020, is playing a crucial role on behalf of S Alam. Before joining the Union Bank, he served at First Security Islami Bank, which is also owned by S Alam Group, and chaired by Saiful Alam himself.
ABM Mokammel Hoque Chowdhury is known as an accomplice of Saiful Alam in bank takeovers, embezzlement and money laundering. He was also close to the ousted Sheikh Hasina government. Ahsanul Alam, son of Saiful Alam, and Belal Ahmed, his son in-law, were also involved in the irregularities. They both were in the Union Bank board and became chairmen of Islami Bank and Social Islami Bank, respectively.
Mustafa K Mujeri, former chief economist of Bangladesh Bank, said it was common knowledge that the bank was sinking. The situation cannot be improved merely through reconstitution of the board. The next course of action should now be determined.
He suggested some corrective steps, including mergers, capital infusions, and banning overseas trips of top officials. Thus, the authorities may collect information from them and place them on trial, if involved with irregularities.
Who runs the bank
The Union Bank is one of nine banks that received approval on political consideration in 2012 during the Sheikh Hasina government. Although S Alam Group was behind the venture, Jatiya Party founder Hussain Muhammad Ershad and general secretary Ziauddin Bablu were placed as its public faces. At the time, Jatiya Party was in a coalition government with the Awami League.
Shahidul Alam, brother of Saiful Alam, became the founding chairman of the Union Bank, ensuring the S Alam Group’s control. Its vice chairman was Lt Gen (retd) Molla Fazle Akbar, former director general of the Directorate General of Forces Intelligence (DGFI).
Before the dissolution of the board, Salim Uddin, on behalf of the S Alam Group, was chairman of the Union Bank. He had earlier served as a director of Islami Bank.
In the newly constituted board, Farid Uddin Ahmad, former managing director of EXIM Bank, was made the chairman, while four other independent directors are – former executive director of Bangladesh Bank Humayun Kabir, former deputy managing director of Rajshahi Krishi Unnayan Bank Mohammad Saiful Alam, Dhaka University’s banking and insurance department professor Shahidul Islam Zahid, and accountant Sheikh Zahidul Islam.
Types of irregularities
The Union Bank focused on securing deposits from government institutions after its inception in 2013. Later, large sums of money were withdrawn under the guise of loans, with suitcase trading entities. Candidates from Patiya in Chattogram used to get preference in the recruitment process.
The situation deteriorated further after Mokammel Hoque Chowdhury joined in 2020. He is also from Chattogram and a relative of Saiful Alam family.
In September 2021, central bank officials visited the bank’s Gulshan branch and found that the actual amount in the vault was lower by Tk 190 million than the declared amount. But no legal actions were taken over the issue as per the rules. The central bank governor, Fazle Kabir, also refrained from taking action in this regard.
Bangladesh Bank reviewed loan data in 2021 and informed the Union Bank in a letter that Tk 183.46 billion – or 95 per cent – of its disbursed loans were eligible to be classified as defaults.
It was also revealed in an audit that nearly 300 companies that exist only in trade licenses had received a majority of the loans. The loans were disbursed from the Panthapath, Gulshan, Banani, Dilkusha, Agrabad, Khatunganj, and some other branches without proper documents and approval.
Despite these irregularities, the Bangladesh Securities and Exchange Commission (BSEC) allowed the Union Bank to raise Tk 4.28 billion from the stock market through an initial public offering (IPO). The bank was listed on the stock exchange in January 2022. However, its share price, which had a face value of Tk 10, has now dropped to Tk 7.
An official of the bank told Prothom Alo that many candidates, including celebrities and cricketers, received cash support from the bank, as per instructions from the higher authorities. In some cases, they received the money on pretext of loans, and the authorities have removed the documents following the recent changeover in political landscape.
S Alam Group takes 65 pc of loans
Following the reconstitution of the board on 27 August, the central bank sought to ascertain the total amount borrowed by S Alam Group and its associates. It also imposed a prohibition on withdrawal of deposits that are directly or indirectly held by S Alam. All shares held in S Alam and his associates in the bank were frozen.
An internal report showed on 31 August that the bank’s total loan amount was Tk 277.67 billion, with Tk 115.78 billion, or 42 per cent, in default. Of them, Tk 92.62 billion are irrecoverable.
However, the bank reported to the central bank in June that its non-performing loan is only Tk 10.44 billion, which is less than 4 per cent of its total loans.
On 24 September, a central bank audit team informed the Union Bank MD in a letter that “S Alam Group’s debt to the bank amounts to nearly Tk 180 billion, most of which are based on fictitious transactions without adequate collateral. Around 65 per cent of the bank’s total loans belong to S Alam Group.”
In a recent letter, a senior official of the bank told the new chairman, “The central bank, on 17 September, sought information as well as documents on direct and anonymous loans of S Alam Group in the Union Bank.”
He emailed the official concerned to learn about the issue, and cc'd the MD. On the following day, the MD told him over the phone to refrain from asking anyone for information on loans of S Alam. Otherwise, he will be removed.
Later, he was tagged as a non-performer and assigned a loan realisation target of Tk 250 million with a two-day duration. Thus, the MD is putting the officials in a tight spot in cases of queries on S Alam’s loans.
This correspondent visited the bank thrice throughout the last one month, but failed to reach MD Mokammel Hoque Chowdhury to collect his comment. Messages on WhatsApp also remained unattended.
The bank is now going through a severe liquidity crisis, with many branches closed for cash transactions. The new board is struggling to take any effective measures.
In this regard, its chairman Farid Uddin Ahmed told Prothom Alo, "If Bangladesh Bank does not provide liquidity support, it will be difficult to run the bank. Bangladesh Bank is aware of everything. They will find out who took how much money. We have no control over these issues."