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Published : 06 Dec 2024, 01:25 AM
Bangladesh Bank has removed the 100 percent margin requirement for opening letters of credit, or LCs, in five Shariah-based banks and one commercial bank. However, other restrictions remain in effect.
The central bank announced the decision in a letter sent to the banks on Thursday.
The banks include Islami Bank Bangladesh, Social Islami Bank, First Security Islami Bank, Union Bank, Global Islami Bank, and Bangladesh Commerce Bank.
These institutions were once under the control of Chattogram-based businessman Saiful Alam, commonly known as S Alam.
Bangladesh Bank Executive Director and Spokesperson Husne Ara Shikha told bdnews24.com: “The 100 percent margin requirement for opening LCs has been withdrawn for these banks.”
However, restrictions on other activities would remain, she said.
The restrictions include a prohibition on issuing new loans.
The banking sector faced significant unrest following the government transition on Aug 5.
On Aug 6, employees of Islami Bank staged protests at the Motijheel headquarters, demanding the removal of S Alam's influence.
Similar protests later spread to other Shariah-based banks linked to S Alam.
In August, Ahsan H Mansur assumed the role of Bangladesh Bank governor and implemented strict measures, including halting new loans from these banks.
The central bank also imposed conditions on LC openings, allowing only back-to-back LCs, LCs for industrial raw materials, and those in priority government sectors, requiring at least a 100 percent margin to safeguard against forex volatility.
However, the banks were allowed to distribute agricultural loans, small and medium enterprises, or SME, loans against deposits, and incentive packages for amounts up to Tk 50 million, as said in Bangladesh Bank’s letter.
Until recently, these six banks were controlled by the Saiful Alam group.
After the interim government took over, Bangladesh Bank dissolved their boards and freed the banks from Alam's control, subsequently imposing stricter oversight.
Except for Islami Bank, the remaining banks are grappling with liquidity shortages, leaving customers unable to withdraw cash as needed.
Governor Mansur had accused S Alam of misappropriating large sums through loans from these banks and transferring the money abroad.
He also highlighted irregularities and undue influence in obtaining loans, which have contributed to the financial instability of these banks.
