Tk86,000cr Deficit: Islami Bank Faces 143-Year Recovery, Experts Warn

Islami Bank’s Provision Shortfall and Recovery Plan
Islami Bank Bangladesh Limited (IBBL), the country’s largest lender by assets, is confronting a significant gap in its balance sheet, with a provisional shortfall of Tk85,888 crore as of September 2025. In response to this alarming deficit, Bangladesh Bank has granted IBBL a 20-year deferral, following an application by the bank on 15 October, which included a plan to address the shortfall.

This massive figure raises concerns about the bank’s long-term recovery prospects. Experts suggest that, should IBBL fail to recover loans from its largest borrowers, such as the S Alam Group, the recovery process could take decades.

Despite efforts to recover debts, the bank is facing challenges. While several properties belonging to the S Alam Group have been attached, auctions have failed to attract buyers, highlighting the difficulty of recouping the funds.

How Long Will It Take to Recover the Deficit?
Islami Bank has managed modest profits over the last few years, posting Tk616 crore in net profit in 2022 and Tk635 crore in 2023. However, even if the bank were to direct all of its profits towards addressing the shortfall, the recovery would take 143 years based on its average annual profits of Tk600 crore.

If this year’s performance is considered, with a projected net profit of just Tk133 crore in 2025, it would take an astonishing 645 years to bridge the deficit. Even under an optimistic scenario, with a 15% annual growth in profits, it would still take about 35 years to recover the shortfall.

Experts’ View on the Situation
Toufiq Ahmad Chowdhury, former director general of the Bangladesh Institute of Bank Management (BIBM), stated that it is impossible for Islami Bank to close the gap solely through profits. He suggested that the government may need to step in with fresh capital to resolve the crisis.

Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD), emphasised that the shortfall reflects years of mismanagement, reckless lending, and regulatory failure, which have undermined trust in the bank.

Bank’s Statement and Strategy
Md Omar Faruk Khan, the managing director of Islami Bank, acknowledged the scale of the shortfall but insisted the bank is committed to addressing it within 20 years. He stated that the bank’s priority is recovering non-performing loans, particularly from the S Alam Group.

Provision Shortfall of Other Banks
The provision shortfall for five banks being merged in Bangladesh is projected to be around Tk135,000 crore as of August 2025. These banks include First Security Islami Bank, Social Islami Bank, Union Bank, Exim Bank, and Global Islami Bank. As of September 2025, Islami Bank’s shortfall alone reached Tk85,888 crore, with Tk82,186 crore related to investments and Tk3,702 crore to off-balance-sheet items.

Financial Health of Islami Bank
While Islami Bank’s total operating income for the first three quarters of 2025 amounted to Tk3,073 crore, 90% of this was spent on operating expenses, leaving just 9.1% (around Tk279 crore) as profit before provisions. This illustrates the bank’s limited capacity to set aside funds to cover its provisioning gap.

What Caused the Shortfall?
The bank’s troubles began in 2017, when the S Alam Group took full control of Islami Bank and several Middle Eastern investors pulled out. A significant portion of the bank’s loan portfolio, nearly 50%, was extended to S Alam Group and its affiliates, but the collateral for these loans was insufficient. This risky lending practice has contributed heavily to the current shortfall.

One notable example is the loan granted to Silver Food Industries, a flour mill in Chattogram. Despite the mill being acquired by the S Alam Group for just Tk18 crore, Islami Bank approved a loan of Tk850 crore, which has since ballooned to over Tk1,000 crore.

Potential Legal Consequences
In a related development, the Anti-Corruption Commission (ACC) is investigating the S Alam Group’s role in a massive loan fraud, potentially amounting to Tk10,500 crore. This case could become the largest financial embezzlement case in Bangladesh’s history.

Provision Shortfall Breakdown

The situation remains critical for Islami Bank, with the need for urgent intervention and recovery strategies to prevent a further erosion of public trust and financial stability in Bangladesh’s banking sector.