Uncertainty surrounding a newly announced deposit protection scheme has emerged as a significant challenge for five Islamic banks currently undergoing a merger process, heightening anxiety among thousands of depositors. Ambiguities in the scheme’s scope and implementation have led to growing congestion at bank branches, as current and savings account holders struggle to access much-needed funds. Bank officials, meanwhile, find themselves unable to provide clear or consistent answers, further fuelling concern. Although no incidents of disorder or unrest have been reported so far, the prevailing uncertainty has clearly eroded depositor confidence.
According to banking sources, customers withdrew approximately Tk 2 billion from the five banks over the past three working days alone. While this reflects depositors’ immediate need for liquidity, it also underscores the fragile state of confidence during the merger process and highlights the need for particularly cautious and transparent management.
In an effort to reassure the public, Bangladesh Bank announced a deposit protection scheme last Tuesday for the five Islamic banks. Under the scheme, deposits of up to Tk 200,000 are fully protected and may be withdrawn at any time under the provisions of the Deposit Protection Act. For amounts exceeding this threshold, withdrawals are to be permitted in phases. Funds held in current and savings accounts are to be released in instalments over a defined period, with full access potentially taking up to 24 months. In addition, the central bank outlined measures for fixed deposits, including maturity extensions and profit rates to be determined in line with prevailing market conditions.
However, difficulties seen at branch level suggest a gap between policy and practice. Many current and savings account holders report that they are unable to withdraw even the protected Tk 200,000. Both customers and frontline staff indicate that only the principal balance is being released, while accrued interest or profit remains inaccessible. In the case of fixed deposits, profit payments have reportedly been suspended; although these amounts are being credited to savings accounts, they cannot be withdrawn. Depositors argue that allowing access to accrued profit would significantly ease panic and restore some degree of trust.
Additional complications have arisen in relation to remittance inflows, interest from savings certificates and bonds, and jointly held accounts. Such funds are typically credited to savings accounts but are currently frozen. Joint account holders, in particular, are facing acute difficulties, as neither party is permitted to withdraw funds, creating hardship for many families.
A snapshot of the current situation is outlined below:
| Account Type | Withdrawal Status | Key Issue |
|---|---|---|
| Current account | Limited | Accrued profit not withdrawable |
| Savings account | Limited | Interest and remittance funds frozen |
| Fixed deposit | Suspended/Limited | Profit not paid or accessible |
| Joint account | Limited | No party allowed to withdraw |
Administrators at two of the banks have stated that, under existing instructions, payments beyond the insured portion cannot be made from the deposit insurance fund. They added that broader transaction facilities would be restored gradually as conditions stabilise.
Analysts contend that the success of the merger initiative now hinges on swift clarification of the scheme’s ambiguities. Clear, uniform guidance—communicated effectively to both staff and customers—will be crucial in restoring depositor confidence and ensuring that the consolidation proceeds smoothly and credibly.