BB appoints new observer to Islami Bank amid unrest

The Bangladesh Bank yesterday appointed a new observer at Islami Bank Bangladesh PLC amid deepening unrest at the country’s largest private bank.

The observer, Md Ashraful Alam, is also a BB executive director. He was appointed under powers vested in it by the Bank Companies Act, 1991, the central bank said.

Mohammad Shahriar Siddiqui, director and assistant spokesperson of BB, confirmed the development, saying the appointment had been made to closely monitor the bank’s overall operations, safeguard the interests of the institution, protect depositors and ensure the greater public interest.

As an observer, Alam will participate in board meetings and other relevant activities, and report his observations on the bank’s operations back to the central bank, added Siddiqui.

Earlier, in December 2022, BB had first appointed an observer at the country’s largest shariah-based bank.

Siddiqui said the banking regulator remains committed to ensuring stability, good governance, transparency, and accountability in the banking sector.

Alam’s appointment is expected to further strengthen confidence and discipline in Islami Bank’s operations, he added.

The development comes as unrest, triggered by the appointment of Md Khurshid Alam as Islami Bank chairman, has gripped the bank. Since the protest started, customers withdrew over Tk 4,240 crore in deposits from the bank within seven days.

Due to the ongoing turmoil, the bank, which had staged a turnaround during the interim government’s tenure, is facing mounting pressure from deposit withdrawals.

On Monday, the bank sought a special liquidity support facility of Tk 10,000 crore from Bangladesh Bank as the country’s largest Shariah-based lender reeled from a surge in deposit withdrawals.

Earlier in the day, the Association of Bankers, Bangladesh (ABB), a forum of bank executives, met with BB Governor Md Mostaqur Rahman over the issue.

After the meeting, Mashrur Arefin, chairman of ABB, said the growing unrest at Islami Bank had taken on a political dimension, raising serious concerns among bankers about its potential impact on the wider financial sector.

He said the situation was eroding confidence in the banking industry and could pose risks to overall financial stability.

On May 24, the eve of the nearly week-long Eid-ul-Azha holiday, the BB appointed Khurshid Alam, a former deputy governor, as chairman of Islami Bank, just hours after the previous chairman resigned.

Khurshid was among the senior BB officials who were forced to leave the central bank by more than 100 protesting officials on August 6, 2024, a day after the fall of the Sheikh Hasina government in the face of a mass uprising.

The appointment has sparked unrest at the bank since June 1, and the situation remains unresolved.

Yesterday, a delegation led by the Conscious Customers’ Forum went to the Ministry of Finance to submit a memorandum demanding the resignation of Khurshid Alam.