The interim government is expected to grant final approval today (Thursday) for the merger of five financially distressed Islamic banks. The move will result in the creation of a new state-owned shariah-based bank and marks a significant step in the financial sector reforms being driven by the post-uprising administration.
According to officials, the decision is set to be made at a meeting of the Advisory Council, chaired by Chief Adviser Professor Muhammad Yunus. The approval will be granted under the provisions of the Bank Resolution Ordinance 2025.
The five banks involved in the merger are First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and EXIM Bank. All five institutions are in critical financial condition, with nearly 77% of their total loans classified as non-performing. Collectively, these bad loans amount to a staggering Tk 1.47 trillion.
Among the five, Union Bank is the worst affected, with around 98% of its total disbursed loans in default. The situation is similarly dire for the others: First Security Islami Bank has 96% of its loans in default, Global Islami Bank 95%, Social Islami Bank 62%, and EXIM Bank 48%.
These banks were previously under the influence of the Chittagong-based S Alam Group, and there have been widespread allegations of mismanagement and financial irregularities, allegedly carried out with backing from the former regime.
To support the formation of the new bank, the government has committed to injecting Tk 200 billion in equity. This will be part of a total paid-up capital of Tk 350 billion, with the remaining Tk 150 billion expected to come from the Deposit Insurance Trust Fund and other institutional deposits.
The new institution is likely to be named United Islami Bank PLC or United Islami Bank of Bangladesh PLC, officials familiar with the matter have said.
To facilitate the transition, the Bangladesh Bank has already appointed administrators to take over the operations of the five struggling banks. The appointed team includes two executive directors and three directors from the central bank. Once the administrators assume control, the existing boards of directors of the affected banks will be dissolved, and the formal merger process will begin.
As part of the operational setup, the central bank has allocated office space for the new bank at Sena Kalyan Bhaban in Motijheel, Dhaka’s primary commercial district. This location will serve as the headquarters during the merger and restructuring phase.
Earlier, in mid-September, the central bank’s board approved the plan to merge the five troubled banks, aiming to stabilise the financial sector and protect the broader economy from the fallout of widespread loan defaults.
In a related move, the Advisory Council may also approve the Deposit Protection Ordinance 2025 during today’s meeting. Under this new law, depositors would be entitled to a maximum refund of Tk 0.2 million in the event of the liquidation of any bank or financial institution.