Bank Merger: What Clients Need to Know

As five Shariah-based banks prepare to merge into a unified entity, Sammilito Islamic Bank, customers are left with several questions about the process. Will they be able to withdraw money from their current branches? Are their old chequebooks still valid? And what happens to their existing deposits?

Details of the Merger
The five banks, which have received a Letter of Intent (LOI) from Bangladesh Bank and approval for their new name from the Office of the Registrar of Joint Stock Companies and Firms (RJSC), will soon become Sammilito Islamic Bank. According to Bangladesh Bank Governor Ahsan H Mansur, depositors will be able to begin withdrawing their money within the next month. He assured that depositors with amounts up to Tk2 lakh will have access to their full deposits, while larger amounts will be paid out in phases through a government gazette notification.

Each depositor will receive a market-based profit rate once the new bank begins operations, in line with prevailing market conditions.

What Happens to Customers’ Accounts?
Officials from Bangladesh Bank confirmed that Sammilito Islamic Bank will receive its licence within the next two weeks. Customers’ existing accounts will automatically transfer to the new bank, and they will be able to access their funds at any of the new bank’s branches.

For example, a customer with Tk20 lakh in Union Bank will see the full amount transferred to their new account. Tk2 lakh can be withdrawn immediately, while the remaining Tk18 lakh will be disbursed in instalments over one to two years, according to a schedule announced by the government. Market-based profit will apply during this period.

Using Old Cheques
In the meantime, customers can still use their existing cheques at their current bank branches. As one Union Bank official stated, “Issuing new cheques to all customers at once is not feasible, so for now, any cheques presented at the old bank branches will be honoured under the authority of the new bank.”

Deposit Insurance and Fund Distribution
Depositors with up to Tk2 lakh will be reimbursed through the Deposit Insurance Trust Fund, which currently holds around Tk18,000 crore. For the 75 lakh depositors across the merging banks, up to Tk12,000 crore may need to be disbursed from the fund.

The capital base of the new bank will be Tk35,000 crore, with Tk20,000 crore from the government and Tk15,000 crore allocated as shares to institutional depositors.

Management and Operations
Nazma Mobarak, Secretary of the Financial Institutions Division under the Ministry of Finance, will chair the board of Sammilito Islamic Bank. The board will consist of seven directors, with five from the government and two from the private sector. The government’s significant contribution to the bank’s capital means that ministry representatives will dominate the board initially, but a reorganisation will take place within six months to a year, with experienced bankers and business leaders joining.

Smooth Transition During the Merger
Despite the scale of the merger, the central bank has assured that daily operations at the merging banks will continue without disruption. Banking services such as payments, the opening of import-export letters of credit (LCs), deposit processing, and remittances will remain unaffected during the transition.

The full merger process is expected to take one to two years, and while the new bank will be government-owned, it will be managed as a private institution.

Key Points of the Merger

The central bank has reassured clients that their money is safe and the new bank will be stronger than the individual banks it replaces.