Irregularities at Union Bank: S Alam linked to Tk17,229cr in unpaid loans

The report, seen by TBS, found that no repayments have been made on these loans since they were made to these entities

Under Sheikh Hasina’s regime, Sharia-compliant Union Bank, controlled by the controversial Chattogram-based S Alam Group, provided Tk17,229 crore in loans to 247 affiliated entities – accounting for 64% of the bank’s total lending , largely uncovered. This is evident from a recent inspection report by the Bangladesh Bank.

The report, seen by TBS, found that no repayments have been made on these loans since they were made to these entities. Moreover, the bank’s Dhaka Panthapath branch extended a loan of Tk118 crore to a customer without permission from the head office, identifying S Alam as the actual beneficiary.

The report also highlighted substantial irregularities at Union Bank involving S Alam Group and its subsidiaries.

As per banking guidelines, customers can borrow up to 80% against their Mudaraba Term Deposit Receipts (MTDR) from a Sharia compliant bank. However, at Union Bank, 19 customers availed Tk79 crore in MTDR to secure loans worth Tk853 crore – which far exceeded standard limits. This was facilitated by officers ranging from “directors to branch managers”.

According to the central bank report, Union Bank also extended Tk1,175 crore in loans to several customers who did not have the required MTDRs, bypassing necessary approvals from the head office.

Moreover, data from the bank’s HR department shows that 76.37% of staff were recruited directly from Chattogram without any survey, the BB report said.

Although the bank’s previous board was dissolved by the central bank on August 27, senior management appointed by that board and staff hired under them will remain in their positions, the inspection report said.

S Alam, employees continue to withdraw money from Union Bank

S Alam Group continues to withdraw funds from Union Bank branches with insider support despite Bangladesh Bank’s restrictions following the ouster of Sheikh Hasina’s government.

S Alam Group chairman Md Saiful Alam along with his brother Rashedul Alam, brother-in-law Arshad Mahmud and other family members withdrew money from their Union Bank accounts and transferred it to accounts registered with different entities. The report states that bank and branch management assisted in these withdrawals.

According to the report, Saiful Alam transferred over Tk8 crore worth of Short Notice Deposit (SND) from Union Bank’s Muradpur and Bandartila branches to his Khatunganj account on August 11, which was later transferred to an account under S Alam & Co at the Agrabad branch. .

The same day, Tk4.20 crore was transferred to Russell Enterprises at the Chittagong DT Road branch, and the remaining Tk4 crore was converted into an MTDR for a company called Crobe Trading, a BahaddarHat branch customer.

The report further notes that money was also withdrawn from the accounts of Saiful Alam’s brother Rashedul Alam and brother-in-law Arshad Mahmud, and later deposited into different accounts.

On August 14 and 18, Tk8 crore of Rashedul Alam’s MTDR was withdrawn from the Kadamtali branch and re-deposited as MTDRs under the names of Ajijunnesa and Rashedul Karim Choudhury.

Similarly, Tk4.22 crore was withdrawn from the account of Saiful’s brother-in-law Arshad Mahmud at the Litchi Bagan branch on August 28 and issued as payment orders under different names.

The report shows that S Alam’s associate company Top Ten Trading House on August 11 withdrew Tk12.29 crore of the Tk32.27 crore MDTS from its branches in Khatunganj, Agrabad and Muradpur through payment orders issued under different names at its branch in Khatunganj.

Of Tk32.27 crore worth of MTDRs in Khatunganj, Agrabad and Muradpur branches, S Alam’s associate company, Top Ten Trading House, withdrew Tk12.29 crore through payment orders issued under different names at Khatunganj branch. The remaining money was used to open 50 new MTDR accounts in the names of various individuals at its Agrabad and Muradpur branches on August 15.

Moreover, it was found that the Top Ten had obtained loans totaling Tk60.56 crore from the bank’s Gulshan branch. Despite the huge outstanding debts, the company was granted accelerated MTDR withdrawal rights.

The BB report recommends suspending liquidity support to Union Bank

Last August, Bangladesh Bank restructured the board of Union Bank and dissolved the boards of seven other banks controlled by S Alam Group. The central bank appointed five independent directors of Union Bank.

To address liquidity concerns, the central bank on September 22 allowed Union Bank to borrow from interbank sources, with Tk 150 crore already approved under this facility.

The central bank’s inspection report shows that former MD ABM Mokammel Haque Chowdhury, HR head, chief risk officer, investment processing team, head of finance department, CFO, chief anti-money laundering compliance officer and other senior department officials, directly were involved in embezzlement of depositors’ funds.

The report, signed on September 23, suggested that suspending liquidity support would be in the best interest of depositors and protect Bangladesh Bank’s reputation.

Union Bank, along with eight other banks, was approved in 2012 under Sheikh Hasina’s government, reportedly due to political considerations.