The bank’s board approved the proposal on 4 November as defaulted loans exceeded Tk1 lakh crore and its provision shortfall reached Tk85,886 crore.
The Islami Bank Bangladesh has received Bangladesh Bank’s clearance to raise its authorised capital fivefold to Tk10,000 crore from Tk2,000 crore to address a growing capital shortfall amid rising defaulted loans.
The bank’s board approved the proposal on 4 November. Its current paid-up capital is Tk1,609 crore. A disclosure on the Dhaka Stock Exchange said the increase would require amendments to the bank’s memorandum and articles of association, as well as approval from other regulators and shareholders at an extraordinary general meeting (EGM).
Additional Managing Director Kamal Uddin Jasim said the move would help reduce the capital shortfall caused by rising non-performing loans and strengthen a key financial indicator.
A senior Bangladesh Bank official said the central bank had issued a no-objection certificate, while final approval would involve the Registrar of Joint Stock Companies and Firms (RJSC) and the Bangladesh Securities and Exchange Commission (BSEC).
Under the rules, the proposed authorised capital of Tk10,000 crore would require subscribed capital of at least Tk5,000 crore and paid-up capital of Tk2,500 crore, the official said.
Given the weak stock market, raising funds through an initial public offering or private placement is considered unrealistic. The government could provide capital directly, or the bank could issue rights shares, the official added.
An Islami Bank official said the S Alam Group holds around 82% of the bank’s Tk1,600 crore paid-up capital through direct and proxy ownership, with the shares frozen by court orders. Increasing paid-up capital would dilute its stake, but new share sales require strict oversight to prevent proxy ownership.
A Bangladesh Financial Intelligence Unit (BFIU) investigation found the group acquired 72% of the bank’s shares in 2016-17 through 22 proxies and suspected shell companies.
Mounting losses and bad loans
Islami Bank incurred a net loss of Tk3,303 crore after tax in the first nine months of the calendar year, January to September, compared with a profit of around Tk79 crore in the same period last year.
The bank posted a loss of Tk1,976 crore in the first quarter of FY27, covering July to September.
Its total loans stood at Tk1,81,860 crore at the end of September, of which Tk1,06,000 crore had become defaulted, according to Bangladesh Bank data. This means more than half of its outstanding loans were classified as non-performing. The bank also has a provision shortfall of Tk85,886 crore.
The S Alam Group controlled Islami Bank from 2017 until August 2024, allegedly withdrawing around Tk88,000 crore through its companies and shadow entities. The loans have since defaulted.
Source: The Business Standard
Read More at: csslbd.net
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