Written by The Banking Post
The government is expected to give its final approval today (Thursday) for the merger of five financially distressed Islamic banks into a new state-owned Shariah-based lender — a major step in financial sector reforms led by the interim administration.
The decision will be made at a meeting of the Advisory Council, chaired by Chief Adviser Professor Muhammad Yunus, under the Bank Resolution Ordinance 2025, officials said.
The five banks set to be merged are First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and EXIM Bank — all struggling under massive loan defaults. Together, around 77% of their total outstanding loans, amounting to Tk 1.47 trillion, have turned into non-performing loans (NPLs).
Union Bank tops the list with nearly 98% of its loans defaulted, followed by First Security Islami Bank at 96%, Global Islami Bank at 95%, Social Islami Bank at 62%, and EXIM Bank at 48%.
Once largely controlled by the Chattogram-based S Alam Group, the banks were allegedly drained of funds under state patronage during the previous regime.
To stabilise the restructured entity, the interim government will inject Tk 200 billion in equity into the new bank, while the remaining Tk 150 billion of its Tk 350 billion paid-up capital will come from the deposit insurance trust fund and institutional deposits.
Officials said the proposed lender may be named United Islami Bank PLC or United Islami Bank of Bangladesh PLC.
The Bangladesh Bank has already appointed administrators — two executive directors and three directors — to oversee the merger. Once they take charge, the existing boards of the five banks will be dissolved, and the consolidation process will begin.
The central bank has also allocated office space for the new entity at Sena Kalyan Bhaban in Motijheel, the capital’s commercial hub.
Earlier, in mid-September, the Bangladesh Bank board approved the merger plan to restore confidence in the banking sector and rescue the troubled lenders.
Meanwhile, the Advisory Council is also expected to approve the Deposit Protection Ordinance 2025 at today’s meeting. Under the new law, depositors will be entitled to a maximum refund of Tk 0.2 million if any bank or financial institution is liquidated — double the current limit of Tk 0.1 million.
