Govt nod for 5 Islamic banks’ merger today

Final government nod to the formation of a new bank by merging financially distressed five Islamic banks is set to be given today, officials say about a major development in reforms spearheaded by the interim regime.

The Advisory Council, in its meeting today (Thursday) with Chief Adviser of the post-uprising government Professor Muhammad Yunus in the chair, is expected to give the approval under the Bank Resolution Ordinance 2025, they add.

The five banks which are about to merge in a new bank after the Advisory Council's seal of approval are First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and EXIM Bank.

These banks are in dire straits with their around 77-percent credits having turned into non-performing loans (NPLs) amounting to a hopping amount of Tk 1.47 trillion.

Of the fiver banks, the Union Bank tops the list, with around 98 per cent of its total disbursed loans defaulted. Among the others, First Security Islami Bank has 96 per cent, Global Islami Bank 95 per cent, Social Islami Bank 62 per cent, and EXIM Bank 48-percent default loans.

These banks, once mainly controlled by Chittagong-based business conglomerate S Alam Group, were allegedly looted extensively under state patronage during the past regime.

The interim government has agreed to provide Tk 200 billion as equity to the newborn state-owned shariah-based bank out of its total paid-up capital amounting to Tk 350 billion. The rest Tk 150 billion would come from the deposit-insurance trust fund and institutional deposits.

The new bank is likely to be named United Islami Bank PLC or United Islami Bank of Bangladesh PLC, according to officials.

Already, the central bank has picked administrators for appointing to the five crisis-hit banks under the modus operandi for their merger into a state-owned sharia-based lender. The administrators are two executive directors and three directors of the Bangladesh Bank.

Once the administrators take seat, the boards of directors of the banks will stand dissolved and the process of merger of the five into one will begin.

Under the salvage plan, the central bank has already allotted office space for the proposed new bank at the Sena Kalyan Bhaban in the business-heartland Motijheel from where the mergers will be executed.

Earlier in mid-September, the central bank board of directors had approved a plan of merger of the five financially troubled Islamic banks to stabilise the financial sector and help rescue the lenders.

Sources have said at the Thursday's meeting the Advisory Council may also give final approval to the draft Deposit Protection Ordinance 2025.

Under the new ordinance, once approved by the Council, depositors will get a maximum refund of Tk 0.2 million in the case of any bank or financial institution is liquidated.

The depositors are entitled to get refund of Tk 0.1 million at best in case liquidation of bank or financial institution under the existing law.

syful-islam@outlook.com