Staff Correspondent
Bangladesh Bank has taken the initiative to merge five financially distressed banks in an effort to restore discipline and stability in the country’s banking sector. The plan has received approval from Prime Minister’s Economic Adviser Dr. Salehuddin Ahmed, based on a proposal submitted by Bangladesh Bank Governor Ahsan H. Mansur.
According to sources, the proposed merged entity will initially be fully supervised by Bangladesh Bank and later opened to private and foreign investors. To stabilize the institution, an estimated Tk 35,000 crore in fresh capital will be required.
The banks under consideration for merger are First Security Islami Bank PLC, Global Islami Bank PLC, Union Bank PLC, EXIM Bank PLC, and Social Islami Bank PLC. An international audit conducted by KPMG (Sri Lanka) and EY (Sri Lanka), along with Bangladesh Bank’s own inspections, revealed severe capital shortfalls, massive classified loans, and persistent liquidity crises in these banks.
As of September 2024, their combined loan defaults exceeded Tk 1.5 trillion, with non-performing loan ratios ranging from 48% to 99%. Despite repeated liquidity support from Bangladesh Bank, the institutions failed to recover, deepening concerns over depositors’ security and public confidence in the financial system.
To address this, a new “receiving bank” will be created under the Banking Resolution Ordinance 2025. The troubled five banks will be merged into it, while ICB Islami Bank will be kept outside the process due to ongoing court cases over share ownership.
Under the plan, Tk 15,000 crore of institutional deposits will be converted into equity through a bail-in process, while the government will inject the remaining Tk 20,000 crore. Later, shares of the merged bank will be gradually transferred to domestic and foreign strategic investors through IPOs, allowing the government to recover its investment with profit.
Bangladesh Bank has also recommended tax holidays and policy support for the new entity to ensure its sustainability.