The long-awaited consolidation of five struggling Shariah-compliant banks into a single, large Islamic bank has taken a significant step forward. Starting today, Wednesday afternoon, administrators will officially take charge of the banks, while the current boards of directors will be dissolved. Additionally, the banks’ managing directors will be removed from their positions.

Bangladesh Bank issued a letter this morning informing the banks that, going forward, they will operate under the Banking Resolution Ordinance. In a bid to address the situation comprehensively, Bangladesh Bank Governor Dr. Ahsan H. Mansur will hold a press conference at 4 PM today to discuss the matter in detail. The central bank has also appointed administrators to oversee the restructuring, outlining their roles and responsibilities.

Following the takeover, the first priority will be to return up to 200,000 BDT to each depositor from the Deposit Protection Fund.

According to Bangladesh Bank, the combined capital of the newly merged Islamic bank will amount to 35,000 crore BDT, with the government contributing 20,000 crore BDT. Depositors will receive 15,000 crore BDT in shares as part of the consolidation process.

Currently, the five banks collectively hold deposits worth 1.42 lakh crore BDT from 7.5 million depositors. However, the total loans stand at 1.93 lakh crore BDT, with a staggering 76% of these loans, amounting to 1.47 lakh crore BDT, classified as non-performing. The affected banks have a combined total of 760 branches, 698 sub-branches, 511 agent banking outlets, and 975 ATMs across the country. Union Bank has the highest rate of non-performing loans, at 98%, followed by First Security Islami (97%), Global Islami (95%), Social Islami (62.3%), and Exim Bank (48.2%).

The primary objective of the consolidation is to safeguard depositors’ funds. In the first phase, up to 200,000 BDT will be refunded from the Deposit Protection Fund. Depositors with up to this amount will receive the full refund, while those with larger deposits will receive their funds in full from the bank’s own reserves. The government’s contribution, along with new deposits and loan recoveries, will bolster the fund. Fixed deposits will be refunded with a 4% profit, while savings and current accounts will receive full repayment. Currently, these banks have been struggling to return depositors’ funds.

Appointments of Administrators

With the appointment of administrators, the boards of the five banks will be dissolved, and the contracts of their managing directors terminated. The following administrators have been appointed:

Exim Bank: Shoukatul Alam, Executive Director of Bangladesh Bank
Social Islami Bank: Salah Uddin, Executive Director of Bangladesh Bank
First Security Islami Bank: Mohammad Badiuzzaman Didar, Executive Director of Bangladesh Bank
Global Islami Bank: Md. Moksuduzzaman, Director of Bangladesh Bank
Union Bank: Mohammad Abul Hasem, Director of Bangladesh Bank

The administrators’ immediate task will be to provide all relevant information to facilitate the consolidation process. Central bank officials will coordinate this at the dedicated office set up at the Senakalyan Bhaban, ensuring all necessary details are aligned for the successful merger of the five banks.