Islami Bank Bangladesh PLC (IBBL) approved, expanded and repeatedly extended a large shipbuilding investment for Ananda Shipyard and Slipways Limited without proper due diligence, effective monitoring or timely legal recovery, leaving the exposure unclassified for more than 15 years despite persistent non-repayment and repeated breaches of banking regulations.
The findings are based on Islami Bank records obtained by TIMES of Bangladesh and information from Bangladesh Bank and Islami Bank officials familiar with the matter.
Bank documents show that IBBL first approved a Tk51.04 crore non-funded investment limit for Ananda Shipyard on August 31, 2006, to finance the construction of a seagoing container vessel.
Less than ten months later, at an emergency board meeting on June 20, 2007, the bank raised the non-funded limit — including Tk302.50 crore in refund guarantees — to Tk431.30 crore. Within another month, the total investment limit was further increased to Tk548.01 crore with the addition of Tk25.00 crore in funded working capital.
IBBL insiders said the rapid enhancements were approved without reviewing project progress, client performance, recovery prospects or collateral adequacy, while overdue forced investments were ignored at every stage.
Bangladesh Bank (BB) officials described the approvals as examples of extreme negligence and serious irregularities by the branch, management and the board.
At the time, the IBBL board was chaired by Abu Nasser Muhammad Abduz Zaher, while M Fariduddin Ahmed served as managing director.
Without reviewing project progress, the bank approved four additional vessels within the existing limit at its January 17, 2008 board meeting. Later that year, on December 25, Islami Bank converted non-funded exposure into Tk342.50 crore in funded Hire Purchase under Shirkatul Melk (HPSM), raising the total approved limit to Tk588.50 crore, according to board papers.
Legal action repeatedly halted
As repayment failed, the investment was first rescheduled on November 30, 2011, and a money loan court case was filed in 2015. Instead of pursuing the case, the bank suspended proceedings under a board-approved settlement with the client on December 22 the following year.
After the client failed to comply with that settlement, another case was filed in 2019. Legal action was again suspended under a further settlement approved on October 26, 2019, allowing repayment of Tk973.57 crore — including Tk346.54 crore in uncharged profit — over ten years after an 18-month grace period.
TIMES investigation found that the grace period under this settlement was repeatedly extended. The most recent extension — to 60 months — was approved at the board meeting on October 30, 2022, far exceeding the maximum grace period of 24 months typically allowed in Bangladesh.
As a result, the bank neither classified the investment as loss nor pursued effective legal recovery for more than 15 years. Yet the account remained unclassified as of December 31, 2025, when the total outstanding stood at Tk1,280 crore, including Tk426 crore in principal.
Central bank officials said Ananda Shipyard had no meaningful export experience in seagoing vessels when the initial limit was approved, yet the bank sharply increased its exposure without reassessing borrower suitability.
Refund guarantees invoked
Records show Islami Bank approved investments to support vessel exports to foreign buyers, including two ships valued at USD 23.9 million and four valued at EUR 29.9 million.
Four refund guarantees of EUR 746,467 each were issued on June 10, 2008 in favour of German buyers. The guarantees were due to expire on June 10, 2009 and were renewed five days earlier, even though buyer contracts required renewal at least 42 days in advance — a condition omitted from the bank’s sanction terms.
As a result, the buyers invoked the guarantees, and Islami Bank encashed them on December 30, 2009, transferring Tk112.56 crore.
Bangladesh Bank officials said copies of the underlying buyer contracts were not preserved in branch records, nor were their conditions reviewed or incorporated into the investment approvals. Responsibility for the loss, they said, rests with branch management, bank management and the board.
Accounting irregularities and alleged diversion
Investigators found that the Tk112.56 crore paid under the guarantees was not recorded as forced investment against Ananda Shipyard but booked as long-term HPSM across multiple accounts — an action the central bank termed a serious offence.
IBBL conducted no internal inquiry into whether key clauses were concealed or whether funds were diverted.
IBBL officials told TIMES that loan funds from the Ananda Shipyard facility were diverted to build a high-value residence in Tongi, Gazipur linked to managing director Afruja Bari. The property, valued at roughly Tk200 crore and including a helipad, is not covered by the loan’s mortgage or collateral.
Documents show branch records contained no expert assessment of Ananda Shipyard’s financial strength, technical capacity, infrastructure or international compliance before approval or disbursement, and no legal opinion was obtained on the shipbuilding contracts with foreign buyers.
Islami Bank also failed to take measures to prevent fund diversion. The shipbuilder did not complete construction in line with the funding received and was unable to provide a satisfactory account of how imported raw materials were used.
Due to the absence of progress reports or site inspections, two under-construction vessels were renamed and exported — along with their main engines and equipment — through another bank as part of two new vessels, according to records.
Islami Bank approved buyer changes and extended fresh financing even after refund guarantees were paid. Bangladesh Bank officials found Ananda Shipyard had raised shipbuilding finance from more than ten other banks and financial institutions, a fact not disclosed in the investment proposals.
Minimal collateral
Despite a May 13, 2006 board decision by Ananda El Dorado Ltd to take the investment from Islami Bank’s Kawran Bazar branch, the bank approved and disbursed the facility in the name of Ananda Shipyard and Slipways Limited — an action the central bank described as a serious irregularity.
Bangladesh Bank officials said that under global practice, shipbuilding finance typically requires collateral worth nearly twice the exposure. Islami Bank, however, accepted collateral of only Tk10 crore against an approved limit of Tk588.50 crore — less than 2 percent.
According to IBBL’s own assessment, the collateral’s current market value is Tk71 crore.
Another irregularity identified was the use of new disbursements to settle overdue instalments on older investments.
Bangladesh Bank officials said Islami Bank repeatedly halted legal action through settlements without proper rescheduling, while continuing to keep the investment unclassified.
One of Islami Bank’s additional managing directors, speaking to TIMES on condition of anonymity, acknowledged that the investment decision had been flawed and said the bank was now attempting recovery.
He said the bank was currently trying to recover about Tk35 crore through the sale of a mortgaged property.
Ananda Shipyard chairman Abdullahel Bari denied the allegations, saying the refund guarantees were encashed because Islami Bank failed to renew them in time through first-class banks.
He said there was no diversion of funds as all payments and imports were handled by the bank, and attributed project delays to the bank’s inability to issue valid guarantees to draw buyer payments.
Afruja Bari, managing director of Ananda Shipyard, said multiple shipbuilding contracts were cancelled because Islami Bank failed to extend or issue required guarantees within buyer-set deadlines and did not provide committed financing at critical construction stages, rendering later extensions ineffective.
Islami Bank’s managing director, Md Omar Faruk Khan, told TIMES that the process of recovering the loan from Ananda Shipyard was currently under way.
A Bangladesh Bank official familiar with the loan irregularities at Islami Bank, speaking to TIMES on condition of anonymity, said Ananda Shipyard had consistently kept the loan “evergreen” by maintaining control over the bank.
Explaining the practice, the official said the group repeatedly made small down payments to secure rescheduling of the loan, but failed to make further repayments thereafter. As a result, the loan continued to be shown as regular for years.
However, Bangladesh Bank assistant spokesperson Mohammad Shahriar Siddiqi said Islami Bank had violated all existing laws and regulations in the case of Ananda Shipyard.
He added that in Bangladesh’s banking history, no loan rescheduling had ever been granted a grace period exceeding 24 months.
