Islami Bank, the largest and most profitable bank in the country, has plunged into a bout of infighting within just five months of wholesale restructuring of the board of directors and top management by dethroning the previous elected body as a part of the naked executive interference.

The conflict stems from loan irregularities, lower dividend declaration and interference of a Chittagong-based business group in the affairs of the bank's board.

On May 20, a group of seven directors threatened to step down if any of them has to resign under pressure.

They made the threat following disclosure by Syed Ahsanul Alam, Islami Bank's vice-chairman and an independent director, on May 11 that he was being hassled by some quarters to resign.

Some of the 19 directors were also furious that the bank declared 10-percent dividend on April 2 for 2016 against a net profit of Tk 450 crore.

They believe that the board announced “the meagre dividend” to see the bank's share price go on a “free fall” so that a Chittagong-based big business group can buy the shares on the cheap.

On March 22, each Islami Bank share was traded for around Tk 45. A month later, the share price dropped by 30 percent to Tk 31.

The business group had allegedly bought shares of the bank in the name of seven companies that were registered with the joint stock companies last year.

At present, the seven companies hold 14.02 percent shares in the bank and have seven directors in the board, including Chairman Arastoo Khan, a retired bureaucrat.

The Arastoo-led board, formed after a major reshuffle in key positions in January, disbursed loans of over Tk 1,400 crore in just three months. Many of the loans were approved without maintaining proper rules and regulations, according to a Bangladesh Bank report.

Amid this situation, Islami Bank is set to hold its annual general meeting at the capital's Kurmitola Golf Club today.

One of the loans worth Tk 132.60 crore approved by the new board was for Infinit CR Strips Industries, a new company formed in February this year.

The loan proposal came from Chittagong's Khatunganj branch and the client is a sister concern of Armada Spinning Mills, one of the companies related to “the controversial business group”, according to a director of the bank.

Arastoo represents Armada Spinning Mills, a new company that has more than 2 percent shares in Islami Bank.

Infiniti's loan proposal, which was for building a steel-sheet manufacturing plant, did not include information about the client's banking activities, said the BB report.

In another instance of irregularity, the board in a recent meeting increased the loan limit for Sister Denim Composite, an affiliate of Thermax Group, from Tk 135 crore to about Tk 200 crore. The loan was given by violating the central bank's investment risk grading rule.

The bank's board also gave loans of over Tk 800 crore for six companies of Nassa Group without taking the required collateral, according to the central bank report.

The group has provided collateral worth Tk 268.63 crore against the requisite amount of Tk 338.59 crore.

Besides, the loans were given without credit ratings: some subsidiaries of Nassa are defaulters but the issue was overlooked when the loans were approved.

Nassa Group's Chairman Nazrul Islam Majumder is also the chairman of the Bangladesh Association of Banks, a forum for bank directors.

Moreover, some 150 employees were recruited without advertising for the positions in another act of malpractice by the new board. Of the new recruits, 34 were for the bank's sensitive IT department, said BB officials.

Islami Bank was set up in 1983 with nearly 70 percent of its sponsorship coming from the Middle East countries.

Since its inception, it has grown threefold every five years. It has over one crore depositors and handle about 30 percent of Bangladesh's remittances.

The bank has financed almost one in every four textile and garment factories in the country.