EXIM Bank and Social Islami Bank Limited (SIBL) have expressed their disagreement with the ongoing process of merging the country’s five Shariah-based banks into a single entity. The boards of directors and top management of these two banks are opposing the Bangladesh Bank’s decision and are actively lobbying policymakers at the central bank and in the government to avoid the merger. According to sources, legal proceedings are also underway at the High Court regarding the issue.

The five banks included in the merger initiative are First Security Islami Bank (FSIB), Union Bank, Global Islami Bank, Social Islami Bank (SIBL), and Export Import Bank of Bangladesh (EXIM). Among these, the first four were previously under the control of the S Alam Group. Following the student-led mass uprising on August 5 last year, Bangladesh Bank dissolved and restructured the boards of these banks. EXIM Bank and SIBL’s promoters argue that their financial positions are stronger than those of First Security, Union Bank, and Global Islami Bank. They claim their liquidity, capital base, and non-performing loan ratios are in better shape. Moreover, both banks have significantly larger volumes of foreign trade—import, export, and remittance—compared to the others. Therefore, they argue, merging EXIM and SIBL with the three banks fully controlled by S Alam Group is unjustified.

An analysis of the financial reports of the five banks supports these claims. Data from 2024 show that the combined foreign trade (imports, exports, and remittances) of the five banks amounted to BDT 943.63 billion. Of this, EXIM Bank alone accounted for BDT 503.81 billion, representing 53.39 percent of the total. In the same year, EXIM facilitated exports worth BDT 256.74 billion and imports worth BDT 241.39 billion. Meanwhile, First Security Islami Bank recorded only BDT 74.37 billion in total foreign trade. Global Islami Bank and Union Bank reported BDT 12.31 billion and BDT 11.02 billion, respectively. On the other hand, SIBL handled BDT 342.12 billion in foreign trade during the same period. Combined, EXIM Bank and SIBL accounted for nearly 90 percent of the total foreign trade volume among the five banks, while the remaining 10 percent was managed by First Security, Global Islami, and Union Bank.

This trend in foreign trade has continued into the current year. Until May, EXIM Bank conducted foreign trade worth BDT 187.44 billion, while SIBL recorded BDT 80.64 billion. In contrast, First Security managed BDT 8.02 billion, Global Islami BDT 6.58 billion, and Union Bank BDT 1.43 billion in foreign trade during the same period.

After dissolving the boards of directors, Bangladesh Bank conducted an Asset Quality Review (AQR) of the five Shariah-based banks using internationally recognized audit firms. The audits, carried out by Ernst & Young (EY) and KPMG, have already been completed. According to the AQR findings, the total deposits held in these five banks amount to over BDT 1.58 trillion, while the disbursed loan (investment) portfolio stands at BDT 1.91 trillion. Out of this, BDT 1.46 trillion has been classified as non-performing. That means 76.69 percent of their distributed loans are defaulted. The combined provisioning shortfall of these banks stands at BDT 745.01 billion, as revealed by the audit.

A closer look at the data shows that Union Bank has the highest default rate among the five, with 97.80 percent of its loans categorized as non-performing. First Security Islami Bank follows with 96.37 percent, and Global Islami Bank has 95.10 percent of its loans in default. In contrast, EXIM Bank’s default rate is 48.20 percent, while SIBL’s is 62.30 percent, according to the AQR. However, EXIM Bank claims that their own audit puts the default rate at 28 percent.

EXIM Bank Chairman Md Nazrul Islam Swapan argues that in terms of foreign trade volume, default rate, and financial capacity, First Security, Union, and Global Islami Banks are nowhere near EXIM Bank. He believes merging EXIM with those three banks is unjustified. Speaking to Bonik Barta, he said, “Despite various challenges, we conducted BDT 187.44 billion in foreign trade through May this year. In the same period, those three banks together couldn’t even manage BDT 10 billion. According to our own assessment, EXIM Bank’s default loan rate is 28 percent, while the default rates of those three S Alam Group-linked banks exceed 90 percent. Under these circumstances, merging EXIM Bank with those banks is absolutely unjustified. We strongly oppose the proposed merger with those three banks.”

Nazrul Islam Swapan added, “Since the board restructuring, we’ve repaid nearly BDT 170 billion to depositors through May. Out of this, BDT 100 billion has been newly collected. Due to the negative news and merger rumors, depositors are still inclined to withdraw their funds. If the central bank publicly confirms that EXIM Bank is in ‘good shape’ and will not be part of the merger, we’ll be able to collect BDT 30 billion in deposits every month.”

After the fall of the Sheikh Hasina government, newly appointed Governor Dr. Ahsan H Mansur dissolved the boards of 14 private banks. Since the board restructuring, the governor has consistently said that the weak Shariah-based banks, plagued by irregularities and corruption, would be merged into a single bank. Islami Bank Bangladesh PLC, however, will remain a separate institution. These two banks will then compete with each other to expand their business.

To implement this plan, Governor Ahsan Mansur held a meeting on June 4—just before the Eid-ul-Azha holidays—with the Chairmen and Managing Directors (MDs) of the five Shariah-based banks. In the meeting, held at Bangladesh Bank, he reviewed the overall status of these banks and shared a roadmap for the merger process.

On June 15, the first working day after the Eid holidays, Governor Ahsan H Mansur spoke to the media on the matter. He said that the process of merging the five Shariah-based banks into one institution is in its final stage. He assured that no employees will lose their jobs due to the merger. In response to a question, the Governor said, “The merger has no connection with the election. It is an ongoing process. We hope the next government will continue this. But instead of waiting for the election, we aim to merge the five Islamic banks within the next few months. There’s no reason for bank officials to worry. However, if needed, some branches may be relocated.”

The Governor has repeatedly assured depositors that the merger is being planned to protect their interests and urged them not to panic. Yet, instead of feeling reassured, many have been rushing to withdraw their funds. Despite receiving over BDT 300 billion in emergency liquidity support from the central bank, these banks are still struggling.

Commenting on the current situation, a senior official of SIBL told Bonik Barta, “Our bank is now like the mathematical problem of a monkey trying to climb a greased pole. Every time we manage to raise some deposits and try to recover, another statement comes from the central bank labeling us as ‘weak’ or talking about ‘merger.’ As a result, we end up losing more deposits than we gain. The central bank says the merger is for the sake of depositors, but customers aren’t listening. They’re coming to withdraw their funds. This way, it’s impossible to revive the bank. We need a final and clear announcement from the central bank.”

SIBL board member Dr. Md Rezaul Haque said he is considering taking legal action against the merger decision. Among the five-member board, he is the only Sponsor Director. He was the Chairman of SIBL in 2017 when the bank was taken over by S Alam Group. Speaking to Bonik Barta, he said, “In 2017, I was forcibly removed when SIBL was taken over. Since then, various irregularities and corruption took place at the bank. Still, compared to the other banks controlled by S Alam Group, SIBL’s condition is better. Except for EXIM, the banks SIBL is being grouped with are extremely weak. We are thinking about filing a case against the central bank’s decision. At the same time, we are trying to understand the evolving situation.”

According to sources at Bangladesh Bank, if everything goes as planned, the process of merging the five Shariah-based banks will begin as early as next month. The central bank will first issue a license for a new bank. The government will provide the initial capital for this bank. All deposits and assets of the five banks will then be transferred under the new entity. Eventually, both domestic and foreign investors and development partners will be brought in as shareholders of the new bank.

Currently, the five banks have a total of 779 branches across the country. Among them, First Security Islami Bank has 226 branches, Social Islami Bank has 180, EXIM Bank has 155, Union Bank has 114, and Global Islami Bank has 104 branches. In addition, these banks have 698 sub-branches, 500 agents, and 1,000 ATM booths. Combined, they employ nearly 16,000 people.

When asked about the matter, Global Islami Bank Chairman Mohammed Nurul Amin said, “We are expecting to receive the AQR report within this month. The Governor has said he will call a meeting after the report is in hand. That meeting will involve discussions and decisions based on the actual situation of each bank. Only then will the merger process be finalized.”

He added, “During the meeting with the governor, the EXIM Bank Chairman expressed his objection to the merger. He said EXIM Bank can recover on its own. Bangladesh Bank responded by saying it has the real picture of the bank’s condition. If EXIM’s claims match that reality, then a different decision might be considered.”

Bangladesh Bank spokesperson and Executive Director Arief Hossain Khan told Bonik Barta that any decision on the merger will be based on consensus among the banks. He said, “We have information that EXIM Bank doesn’t want to be part of the merger process. We’ve also learned that SIBL has expressed a similar stance. If the objections raised by these two banks are valid, Bangladesh Bank will certainly take them into account.”

Arief Hossain Khan added, “Personally, I believe it’s not right to impose any decision by force—whether on individuals or institutions. Reforms in the banking sector are necessary for the greater interest of the country’s economy. But those reforms must also be designed in a way that avoids raising questions in the future.”