Rupali Bank clears $283m foreign loan for S Alam's power plant without regulatory approval

Details: The state-owned Rupali Bank has repaid $283 million across two instalments of SS Power Limited's foreign loan without the approval of the Bangladesh Bank, a move the central bank asserts is in violation of the loan agreement's terms. The central bank has dispatched a letter to Rupali Bank seeking an explanation regarding the matter, which was confirmed to the media by a senior official of the bank.

The power plant, situated along the Bay of Bengal at Banshkhali in Chattogram, is jointly owned by S Alam Group and China's SEPCO III. The Managing Director of the plant is Mohammad Saiful Alam Masud, Chairman of S Alam Group.

In the correspondence, the Bangladesh Bank stated that Rupali Bank paid the third loan instalment of $140 million (paid on 19 December 2024) and the fourth instalment of $143 million (paid on 23 June 2025) to the Singapore branch of the Bank of China without its approval. The first and second instalments (totalling $243.76 million) were paid with the central bank's approval. The first instalment was an automatic payment as per the agreement, whilst the second instalment was paid by Islami Bank with permission on 20 June 2024.

According to the Bangladesh Bank, a loan of $1,697 million was secured from the Bank of China for the plant's construction and power production until 2035. Of this, $575 million (principal and interest) has been repaid thus far. Following the signing of an agreement between the Bangladesh Power Development Board (BPDB) and SS Power, former Prime Minister Sheikh Hasina and Chinese President Xi Jinping jointly launched the project in 2016.

A senior official at the Bangladesh Bank commented that Rupali Bank will have to seek the Bangladesh Bank's approval to pay the fifth instalment, which will be granted once the application is submitted. A senior Rupali Bank official told the media that the payments for the third and fourth instalments were sent to the correct account, but Bangladesh Bank approval was not obtained due to a technical issue, not intentionally by Rupali Bank. He added that upon receiving the central bank's letter, they are treating the matter seriously and will seek approval before sending the fifth instalment.

According to him, fund transfers typically pass through multiple stages, including a foreign currency (FC) account where funds can be credited but not debited. Consequently, the transaction was executed directly, bypassing the FC account. The Rupali Bank official further stated that SS Power had financed all dollar purchases for the payments, and that every instalment so far had come from the company. The Bangladesh Bank has not issued any formal statement in this regard.

When contacted, Rupali Bank Managing Director Kazi Md Wahidul Islam told the media that he could not provide accurate details on the matter and was not in a position to explain it fully, suggesting clarification be obtained from the local office. Later, Rupali Bank's communication department provided a written statement to the media.

According to the bank, loan instalments approved by the Bangladesh Investment Development Authority (Bida) may be repaid without prior approval from the Bangladesh Bank. In the case of SS Power I Limited, the following arrangements were made: Under the Accounts Agreement signed between the Bank of China, Rupali Bank PLC, six other Chinese lending banks, and SS Power I Limited, a total of 10 accounts were opened for different purposes. Among these, two specific accounts—the Debt Service Reserve Account (DSRA) and the Debt Service Accrual Account (DSAA)—were designated to ensure transparency and reliability in project loan repayments.

The primary purpose of the DSRA is to maintain a reserve equivalent to one full instalment of the loan, which must be kept intact throughout the loan period. The DSAA, on the other hand, is designed to accumulate funds monthly so that the semi-annual instalments can be paid on schedule. On the due date, lenders automatically deduct the instalment amount from the DSAA. If funds in the DSAA are insufficient, the instalment is deducted from the DSRA, as stipulated in the Accounts Agreement.

At the time of the first instalment, SS Power Limited was required to first build up the DSRA balance and then accumulate funds in the DSAA. For this purpose, Bangladesh Bank approval was obtained to build the DSRA balance. However, by 19 December 2023, the BPDB had not paid SS Power Ltd for electricity supplied, leaving the company unable to build the DSAA balance. As a result, lenders deducted an equivalent amount from the DSRA. Since the DSRA was designated solely to hold the equivalent of one instalment, replenishing its balance was treated as a reserve account top-up, for which central bank approval was obtained.

For the second instalment, a total of $101 million was paid through Islami Bank Bangladesh PLC. As Islami Bank was not a party to the Accounts Agreement and had no Bida approval to remit funds for this purpose, Bangladesh Bank approval was obtained. For the third and fourth instalments, Rupali Bank PLC was unable to directly debit the FC account because it lacks offshore banking facilities and cannot conduct daily transactions in dual currencies. As the repayments had to be made within the agreed deadline, the bank deposited the 3rd and 4th instalments directly into the DSAA, following Bida's approval and Bangladesh Bank guidelines.

Khaborwala/ASN