Why is Bangladesh Bank giving S Alam’s power plant an LC exception
Bangladesh Bank has exempted S Alam Group-owned SS Power 1 from a key restriction under the Bank Company Act, 1991, allowing Rupali Bank to open import LCs for the power plant with a 100% cash margin. The decision comes while the government is still pursuing S Alam's massive defaulted loans and allegedly laundered assets at home and abroad.
In a Nutshell:
- Bangladesh Bank has allowed Rupali Bank to open import LCs for SS Power 1 until December 2027, with a 100% cash margin.
- The 1,320MW coal-fired plant in Banshkhali has supplied electricity to the national grid since September 2023.
- S Alam linked entities accounted for Tk63,125 crore, or 86%, of loan default cases filed in Chattogram between August 2024 and August 2025.
- The government has sent MLARs (Mutual Legal Assistance Requests) to four countries to recover S Alam assets and is pursuing cases in Bangladesh.
- In April, the Finance Minister said S Alam's commercial operations remained suspended because of loan defaults and that Bangladesh Bank had issued no directive to reopen them.
Context
The Bank Company Act, 1991, generally prohibits banks and financial institutions from providing credit facilities to defaulting borrowers. Section 27A(3), as amended, allows an exception where a defaulting company within a business group is not a wilful defaulter, or where Bangladesh Bank finds a reasonable cause for its failure to repay, allowing another company in the group to avoid being treated as a defaulter with prior Bangladesh Bank approval. The 2023 amendment also introduced the statutory definition and identification of wilful defaulters. This makes the basis of the SS Power exemption crucial, especially after investigations found more than Tk2.25 trillion in S Alam-linked exposure, while BFIU (Bangladesh Financial Intelligence Unit) has frozen Tk243.60 crore across 662 bank accounts and Tk813.56 crore across 227 BO accounts, with courts seizing Tk4,264 crore in fixed assets.
Why it matters
The exemption is significant because the Bangladesh Bank is not simply allowing an ordinary company to open a letter of credit. It is exercising a specific statutory discretion over a group with an extensive and documented record of disputed bank financing and defaulting. What evidence did Bangladesh Bank examine before deciding that SS Power was a suitable candidate for this exception? Did the central bank determine that SS Power's failure to repay was not wilful, or that there were reasonable grounds for it? The 1991 Bank Company Act's restriction is intended to prevent banks from extending fresh facilities to borrowers with a history of failing to repay; exceptions, therefore, operate on a conditional basis. While Bangladesh Bank has cited the risk that interruption of raw material imports could disrupt power generation, it has yet to explain why and how SS Power satisfies the legal conditions for the exemption.
What we think
Keeping a 1,320MW power plant supplied with coal is a legitimate public interest concern, and requiring a 100% cash margin can limit the immediate risk to Rupali Bank. But that safeguard does not resolve the questions surrounding the exemption itself. Bangladesh Bank should clarify whether the cash margin must come from SS Power's own verified operating funds, rather than from another S Alam entity, and how it will prevent the facility from creating fresh financial exposure elsewhere in the group. It should also explain how the new LC arrangement interacts with existing asset freezes and recovery proceedings involving SS Power, particularly while the government is still seeking to recover S Alam's old liabilities through the courts and in foreign jurisdictions. As recently as April, Bangladesh Bank had still issued no directive to reopen S Alam's operations due to its history of loan defaults. So, what changed between then and now that makes them finally eligible for an exemption?