Bangladesh Bank has finally decided to merge five troubled Shariah-based private banks to form a new state-owned bank. The decision came during a special board meeting held on Tuesday (16 September) at 3 p.m. at the central bank’s headquarters, chaired by Governor Ahsan H. Mansur.
According to the meeting, one administrator will be appointed to each of the merging banks, supported by four additional officers. As per the government’s plan, First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and Exim Bank will be merged into a new state-owned bank, tentatively named United Islami Bank.
Bangladesh Bank officials said that once the merger is finalized, the existing boards of directors and managing directors (MDs) of the banks will be dissolved. However, employees and depositors will be assured of security. All assets and liabilities of the merging banks will be transferred under the new bank. Later, shares of the new bank will be offloaded to the private sector to recover the government’s investment.
According to central bank data, 48 to 98 percent of loans from these five banks are now non-performing. The merger process will require Tk 35,200 crore, of which Tk 20,200 crore will be provided by the government. Four of the banks have long been under the control of the S. Alam Group, while Exim Bank was led by NASA Group chairman Nazrul Islam Mazumder.
Bangladesh Bank believes this merger will help eliminate long-standing irregularities and corruption in the Islamic banking sector, while also restoring public confidence. The banks had collapsed largely due to undue interference and widespread corruption during the previous Awami League government’s tenure. Authorities now hope this restructuring will pave the way for stability and recovery in the banking sector.