Economy
2 days ago

Five underperforming banks to merge into Islamic bank

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Bangladesh Bank will merge five underperforming Islamic banks into a single entity, which will be structured in line with Shariah-compliant banking principles.

The decision came at a meeting on Wednesday, where Bangladesh Bank Governor Ahsan H Mansur met with the managing directors and chairpersons of the five banks.

According to First Security Islami Bank Chairman Abdul Mannan, the banks involved are Social Islami Bank, Global Islami Bank, First Security Islami Bank, Union Bank, and EXIM Bank.

Four of these banks were previously controlled by Saiful Alam, a Chattogram-based businessman known for his close ties to deposed prime minister Sheikh Hasina.

EXIM Bank’s board was under the control of Nazrul Islam Mazumder, also a close associate of Hasina.

The merger process is expected to begin after Eid-ul-Azha, taking approximately three and a half months.

A new board will be formed, comprising existing board members and representatives from various sectors. Until the merger is complete, the banks will operate under the direct supervision of the central bank.

It has also been decided that the newly formed bank must reduce its total defaulted loans to below 10 percent. The banks’ assets will be consolidated, and bad assets will be transferred to a management company.

A fresh banking licence will be issued by Bangladesh Bank for the newly formed entity. The government, along with international development partners, will provide the required capital. Budgetary allocations have already been made in the 2025-26 fiscal year.

The entire process will be carried out under the upcoming Bank Resolution Ordinance 2025.

Mannan expressed optimism that the move would bring much-needed stability to the banks, and confirmed that the new bank will follow a fully Shariah-compliant model.

He also acknowledged that most of the loans that were issued while these banks were under S Alam Group’s influence have turned into defaults, severely weakening their financial position.

“After the merger, the number of branches will increase and customer service will improve,” he added.

“Initially, these banks will be brought under state control, after which the government will seek foreign investors for privatisation,” Mannan said.

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