Minimum 2% of shares for board membership is a reason behind the problems in the banking sector

Referring to the legal provision that requires a 2% stake in a commercial bank to become a director, Abdul Mannan, chairman of First Security Islami Bank (FSIB), said this has removed experienced bank management from the boardrooms and allowed infamous people like S Alam to enter. bank management roles.

He compared the “black law” to the 213-year-old Permanent Settlement Act during the British era, allowing permanent land ownership by zamindars only to facilitate colonialism.

“This is one of the key reasons behind the current crisis in the banking sector,” Mannan told The Daily Star in a recent interview. He blamed the previous government for amending the Banking Companies Act to enforce the participation provision.

Mannan, former managing director of Islami Bank Bangladesh, was forced to resign from his post after he was taken hostage at gunpoint by S Alam with the help of security agencies in 2017.

He later left the country and returned home days after the Awami League government fell on August 5 in a mass uprising. He was then appointed to navigate the recovery of the crisis-hit Sharia-based lender.

“Returning home after seven and a half years, I find that the entire banking sector, especially Islamic banks, are facing crushing challenges with their reputation badly affected,” he commented.

According to the Banking Company Law, any person aspiring to become a director of a private commercial bank must hold at least 2% of the total paid-up capital of that bank.

Mannan said the former Awami League government amended the Banking Company Act 1991 in 2013 to add the provision of a 2% shareholding.

Seizing this opportunity, he said that a section of influential and rich people were allowed to enter the boards of the banks by simply acquiring 2% of the banks’ shares.

“Mohammed Saiful Alam (popularly known as S Alam) is a glaring example of the misuse of this law,” he said.

Before Mannan, Mohammed Saiful Alam, owner of the controversial Chattogram-based conglomerate S Alam Group, was the chairman of First Security Islami Bank.

Mannan said as a result of the 2013 amendment, some real bank leaders who had helped establish good governance were excluded from the boards because they did not hold the 2% quota.

Instead, people like group owner S Alam took control of the banks, he added. “This particular group (the S Alam Group) came in and bought the majority of the shares, thereby becoming the owner of seven or eight banks.”

As a result, four or five members of a family bought shares of more than 2 percent and took control of the entire board. And in some banks, he said, board meetings haven’t been held in years.

WEEKLY ORGAN TO HEAL WOUNDS FSIB

On a recent Saturday afternoon in September, the premises of First Security Islami Bank were unusually busy.

Despite the weekend, top executives, including the new chairman of the bank, which is facing serious financial difficulties, were found busy.

Mannan, 72, spent the day moving between floors, supervising and interacting with employees.

“The overall situation is not so good. We are working day and night, even on weekends, to bring the bank back from the brink of financial collapse,” Mannan said.

He said since he took over as chairman on Sept. 2, he has made every effort to motivate the bank’s executives while stepping up efforts to recover loans.

As a result, he said they have been able to recover bad loans of Tk 350 million in the last three weeks.

“We are trying to improve the health of our bank and we are making continuous efforts to recover bad loans. We have worked relentlessly for the sake of the depositors,” he said.

Expressing concern over bad loans, he said that all their depositors’ assets of Rs 29 lakh were concentrated in nearly 200 borrowers.

“It was also because of the 2% equity provision.”

The deposits, which were collected from across the country through more than 200 branches and 175 sub-branches of FSIB, were mainly distributed to borrowers through Khatunganj branch in Chattogram and Gulshan and Motijheel branches in Dhaka, he said.

These three bank branches have approved large loans.

According to the bank’s latest annual report, its total deposits are around Tk 45,000 crore. The value of classified loans was nearly Tk 2,254 crore, while non-performing loans (NPLs) stood at Tk 1,400 crore.

Bangladesh Bank has taken many initiatives to improve the bank’s situation, including allowing the lender to avail of interbank liquidity support.

Mannan said the FSIB crisis would soon be over.

“I hope that soon there will be a big positive change in the situation,” he said. “I hope that by October, the crisis will be over. And by November and December, we will be able to achieve positive growth.”

“Our customers will not lose even a taka,” he assured.