Wednesday, 17 September, 2025
The long-awaited merger of five troubled Shariah-based private banks into a single state-owned Islamic bank has formally begun, following Bangladesh Bank’s decision to appoint administrators to oversee the process.
The move, taken at a special board meeting Tuesday chaired by Governor Dr Ahsan H Mansur, is one of the most ambitious financial interventions in the country’s history.
The five institutions—Exim Bank, Social Islami Bank Limited (SIBL), First Security Islami Bank, Union Bank, and Global Islami Bank—are facing a combined equity shortfall of nearly Tk 40,000 crore, much of it linked to years of alleged loan embezzlement and fund diversion by S Alam Group and its affiliates.
Forensic audits revealed default rates of 95–98 per cent at several banks, with the overall advance-to-deposit ratio exceeding regulatory limits and putting depositors’ funds at grave risk.
A senior Bangladesh Bank official confirmed that formal orders will shortly be issued to appoint administrators, dissolve the existing boards of the five troubled banks, and amend the Bank Resolution Ordinance and related laws to enable the merger. Each bank will be overseen by an administrator supported by a four-member team to ensure a smooth transition.
The new entity, provisionally named United Islami Bank, will receive its licence from Bangladesh Bank and begin operations once all assets and liabilities of the five institutions are consolidated. The current boards of directors and managing directors will be dissolved, and all shares of the merged banks rendered void.
Under the plan, large depositors may be offered the option to convert a portion of their deposits into equity, while small depositors will retain unrestricted access to their funds. A forensic audit has revealed staggering default rates ranging from 48 to 98 per cent, with Union Bank emerging as the worst performer.
The central bank has framed the move as a measure to safeguard depositors’ money and restore confidence in the country’s embattled banking sector. Governor Ahsan H Mansur has assured that lower-level staff will have job security, though top executives are unlikely to be retained.
He reiterated that the merger is expected to be completed by December, with depositors able to continue their normal banking transactions with their existing institutions during the transition period.
The central bank will dissolve the existing boards, seize shares from sponsor directors implicated in irregularities, and transfer all assets and liabilities into a new state-owned entity, provisionally called United Islami Bank.
Tk 20,000 crore will be injected from the national budget as fresh capital, with the remainder of the Tk 35,000 crore recapitalisation requirement to be raised through loans and the sale of confiscated shares. Large depositors may be offered the option to convert a portion of their funds into equity, while small depositors are promised unrestricted access to their savings.
Critics have questioned why comparatively stronger institutions such as Exim Bank and SIBL are being forced into the merger, effectively absorbing the losses of weaker banks. However, Bangladesh Bank argues that the consolidation is the only realistic way to prevent a systemic collapse, safeguard depositors, and restore confidence in the Islamic banking sector.
Experts such as former World Bank economist Zahid Hussain have warned that forced mergers must follow due process, including consideration of liquidating hopelessly insolvent banks and rationalising branches and staff to avoid turning the new institution into another overextended, politically compromised lender.
If implemented transparently and insulated from political interference, the creation of United Islami Bank could mark a turning point for Islamic banking in Bangladesh, an industry that accounts for a significant share of total deposits but has been crippled by governance failures. Success could set a precedent for cleaning up the wider banking sector; failure would risk throwing vast sums of public money into a black hole.
Bangladesh Bank aims to finalise the merger by December. Administrators have already been appointed, and a working committee led by Deputy Governor Md Kabir Ahmed is drawing up the final implementation plan.
Legal challenges from disgruntled shareholders are expected, but the central bank has vowed to defend its actions through the Attorney General’s office as it attempts to steer the country through one of its most complex banking rescues to date.
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The long-awaited merger of five troubled Shariah-based private banks into a single state-owned Islamic bank has formally begun, following Bangladesh Bank’s decision to appoint administrators to oversee the process.
The move, taken at a special board meeting Tuesday chaired by Governor Dr Ahsan H Mansur, is one of the most ambitious financial interventions in the country’s history.
The five institutions—Exim Bank, Social Islami Bank Limited (SIBL), First Security Islami Bank, Union Bank, and Global Islami Bank—are facing a combined equity shortfall of nearly Tk 40,000 crore, much of it linked to years of alleged loan embezzlement and fund diversion by S Alam Group and its affiliates.
Forensic audits revealed default rates of 95–98 per cent at several banks, with the overall advance-to-deposit ratio exceeding regulatory limits and putting depositors’ funds at grave risk.
A senior Bangladesh Bank official confirmed that formal orders will shortly be issued to appoint administrators, dissolve the existing boards of the five troubled banks, and amend the Bank Resolution Ordinance and related laws to enable the merger. Each bank will be overseen by an administrator supported by a four-member team to ensure a smooth transition.
The new entity, provisionally named United Islami Bank, will receive its licence from Bangladesh Bank and begin operations once all assets and liabilities of the five institutions are consolidated. The current boards of directors and managing directors will be dissolved, and all shares of the merged banks rendered void.
Under the plan, large depositors may be offered the option to convert a portion of their deposits into equity, while small depositors will retain unrestricted access to their funds. A forensic audit has revealed staggering default rates ranging from 48 to 98 per cent, with Union Bank emerging as the worst performer.
The central bank has framed the move as a measure to safeguard depositors’ money and restore confidence in the country’s embattled banking sector. Governor Ahsan H Mansur has assured that lower-level staff will have job security, though top executives are unlikely to be retained.
He reiterated that the merger is expected to be completed by December, with depositors able to continue their normal banking transactions with their existing institutions during the transition period.
The central bank will dissolve the existing boards, seize shares from sponsor directors implicated in irregularities, and transfer all assets and liabilities into a new state-owned entity, provisionally called United Islami Bank.
Tk 20,000 crore will be injected from the national budget as fresh capital, with the remainder of the Tk 35,000 crore recapitalisation requirement to be raised through loans and the sale of confiscated shares. Large depositors may be offered the option to convert a portion of their funds into equity, while small depositors are promised unrestricted access to their savings.
Critics have questioned why comparatively stronger institutions such as Exim Bank and SIBL are being forced into the merger, effectively absorbing the losses of weaker banks. However, Bangladesh Bank argues that the consolidation is the only realistic way to prevent a systemic collapse, safeguard depositors, and restore confidence in the Islamic banking sector.
Experts such as former World Bank economist Zahid Hussain have warned that forced mergers must follow due process, including consideration of liquidating hopelessly insolvent banks and rationalising branches and staff to avoid turning the new institution into another overextended, politically compromised lender.
If implemented transparently and insulated from political interference, the creation of United Islami Bank could mark a turning point for Islamic banking in Bangladesh, an industry that accounts for a significant share of total deposits but has been crippled by governance failures. Success could set a precedent for cleaning up the wider banking sector; failure would risk throwing vast sums of public money into a black hole.
Bangladesh Bank aims to finalise the merger by December. Administrators have already been appointed, and a working committee led by Deputy Governor Md Kabir Ahmed is drawing up the final implementation plan.
Legal challenges from disgruntled shareholders are expected, but the central bank has vowed to defend its actions through the Attorney General’s office as it attempts to steer the country through one of its most complex banking rescues to date.
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