BB returns Al-Arafah Islami Bank to former owners

The Bangladesh Bank has returned Al-Arafah Islami Bank PLC (AIBL) to its former owners and shareholders, reconstituting the board of directors to include 14 directors drawn from the bank’s original sponsor-entrepreneurs.

The central bank issued a letter to the bank’s managing director yesterday informing him of the decision. The new board retains the existing board members alongside the returning sponsor-directors, including Khalilur Rahman, founder of Chattogram-based KDS Group, and his associates.

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BB Executive Director and spokesperson Arief Hossain Khan confirmed the development, saying the bank’s improved financial condition prompted the handover.

“The bank’s financial condition has improved compared to before, so it has been handed back to its founding sponsors,” he said.

Khan added that the central bank had dissolved the boards of several other banks following the 2024 political transition, but in most cases the original sponsors could not be traced or were unavailable to take over management.

“In the case of Al-Arafah Islami Bank, the situation is different. The founding sponsors are available, so the bank has been returned to them,” he said.

NEW BOARD, OLD FACES

The bank’s  board retains its five existing independent directors.

It also adds 14 former members -- Badiur Rahman, Salim Rahman, Ahamedul Haque, Rafiqul Islam, Imadur Rahman, Nazmul Ahsan Khaled, Khalilur Rahman, Anowar Hossain, Abdus Salam, Liakat Ali Chowdhury and Enayet Ullah, along with Mahbub Ahmed as nominee director of KDS Garments, Farid Uddin Ahmed as nominee director of KDS Textiles, and Sharif Uddin Taslim as nominee director of KY Steel Mills.

Among the returning directors, Khalilur currently serves as a director of Pragati Insurance and Pragati Life Insurance. He has been asked to resign from those positions to join Al-Arafah’s board, as law does not permit a person to serve as director of both an insurance company and a bank simultaneously.

Al-Arafah was established as a private limited company in 1995 under the leadership of its sponsor directors.

In 2023, Abdus Samad Labu, vice-chairman of S Alam Group, became the bank’s chairman. He lost control after leaving the country following former prime minister Sheikh Hasina’s ouster on August 5, 2024, amid political unrest.

The BB subsequently reconstituted the board that September, appointing Khwaja Shahriar, former managing director and CEO of LankaBangla Finance, as chairman. But the bank’s non-performing loans continued to rise, and it failed to provide any cash dividend over the last two years. As a result, the bank was downgraded to the Z category on the Dhaka Stock Exchange (DSE).

Despite its affiliation with the S Alam Group, which has reportedly laundered billions from other banks under its control, Al-Arafah does not have a large loan portfolio with the conglomerate.

Its profit rose 11.7 percent year-on-year to Tk 85 crore last year. During the same period, the bank’s deposits grew by 6.89 percent to Tk 48,596 crore.

Its NPLs rose 19 percent to Tk 8,852 crore, accounting for 17 percent of its total loans. At the end of the year, its return on assets stood at 0.13 percent, while its net profit margin was 1.05 percent.