Islami Bank Bangladesh PLC has been operating without a board of directors and a chairman for over a month and a half. The managing director of the country’s largest lender is also posted on an acting basis, creating a virtual deadlock in a bank that serves nearly three million customers. Approximately BDT 1 trillion in non-performing loans (NPLs) has already burdened the bank and put even genuine customers at risk of default.
Islami Bank faced renewed instability from the beginning of June 2026, following the central bank’s appointment of a chairman at the bank. The bank faced a severe liquidity crisis due to continuous customer protests, demonstrations and massive withdrawals of deposits, failing to manage the crisis even after securing a central bank loan of roughly BDT 130 billion. Bangladesh Bank consequently dissolved the entire board of directors of the bank on June 14. On the same day, Mohammad Zahir Hossain, an executive director of the central bank, was appointed as the bank’s administrator. For over a month and a half, the administrator has been making all decisions for the bank.
The policy-level crisis and instability have driven all financial indicators of Islami Bank downward. In the second quarter (April–June) of 2026, the bank’s operating loss reached BDT 10.16 billion, whereas the loss was BDT 2.74 million in the first quarter (January–March). The operating loss of Islami Bank stood at BDT 12.85 billion for the first half of the year (January–June) and its net loss exceeded BDT 13.16 billion.
Islami Bank’s deposits decreased by BDT 213.65 billion in the second quarter. At the end of March, the bank’s deposit balance stood at around BDT 1.85 trillion, dropping to around BDT 1.64 trillion at the end of June.
The bank’s distributed loan (investment) balance increased due to the addition of unpaid interest, worsening the bank’s credit-deposit ratio (AD ratio) further, according to the Islami Bank’s half-yearly financial report.
At least four officials from the head office of Islami Bank and multiple branch managers told Bonik Barta that the bank’s foundation is already shaky due to the instability over the chairman’s appointment. For a month and a half, the bank has also lacked a full board of directors, a chairman and an MD with full authority, disrupting a smooth business operation. Stagnation has set in regarding business activities such as the approval and renewal of working capital, loan rescheduling and opening letters of credit (LCs), according to sources. Instead of turning around, the bank’s losses are continuously increasing. Moreover, the responsibilities of the bank’s officials have become limited solely to collecting deposits.
Md Altaf Hossain, the acting managing director of Islami Bank, said: “Due to the absence of a board, we’re facing difficulties in collecting deposits from corporate customers only, whereas a full board of directors boost confidence in this category of customers. We’re trying to keep the rest of the bank’s operations normal. The demands of investment (loan) recipients are also being met as much as possible.”
For the past few days, at least a dozen customers of Islami Bank have told Bonik Barta anonymously that they are unable to open import or back-to-back LCs according to their demand. They are also unable to secure the working capital needed to pay salaries and allowances for their employees. They said it is not possible to suddenly shift business to another bank, which is driving their businesses to the verge of shutting down. If their businesses close, the bank’s loans are bound to become classified (defaulted).
A ready-made garment entrepreneur told Bonik Barta, “Due to a lack of working capital, I can’t pay the salaries and allowances of nearly five thousand factory workers. The bank is also not letting us open LCs. In this situation, export orders worth approximately $20 million from foreign buyers are at risk of cancellation. Branch-level officials say that without a board, such LCs aren’t being opened. The administrator and acting MD don’t want to take the risk. A solution to this situation is urgently needed.”
When asked about the customers’ complaints regarding LC complications, Md Altaf Hossain said, “We’re opening import LCs using the dollars we receive from remittances and export earnings, despite certain limitations. Because of this, some large customers may face issues in this regard. But we’re optimistic that this crisis will gradually ease.”
Following the student-led mass uprising on August 5, 2024, Bangladesh Bank dissolved the Islami Bank’s board of directors. At that time, Obayed Ullah Al Masud, former MD of Sonali Bank, was appointed as the bank’s chairman. He was subsequently removed, and Professor M Zubaidur Rahman was made chairman of the bank. On May 24, 2026, the central bank forced him to resign and appointed former deputy governor Md Khorshed Alam as chairman. But instability broke out at Islami Bank surrounding this appointment.
Branding Khorshed Alam as “controversial and corrupt,” a portion of the bank’s customers launched protests starting June 1. Customers simultaneously began withdrawing their deposits from the bank. The bank, which had a liquidity surplus, consequently faced disaster within just a week. To manage the situation, the central bank also had to provide a liquidity support of BDT 130 billion. As the situation failed to improve ultimately, Bangladesh Bank dissolved the entire board of Islami Bank on June 14. At the same time, Bangladesh Bank Executive Director Mohammad Zahir Hussain was appointed as administrator, and all powers of the board were vested in him.
Neither the administrator nor the central bank’s spokesperson could provide information on when Islami Bank’s new board will be formed. The Islami Bank’s administrator told Bonik Barta, “The central bank is responsible for forming the board of directors. They’re working to find the right person. The bank’s daily transaction situation is now normal. We’ll repay the money borrowed from the central bank in instalments. Many of the customers who panicked and withdrew money from the bank have returned.”
Arif Hossain Khan, executive director and spokesperson of Bangladesh Bank, told Bonik Barta, “The department responsible for forming the bank’s board is working on it. We may see the outcome very soon.”
Regarding the concern that even good customers of the bank are at risk of default, he said, “We’re vigilant. All powers of the board are vested in the administrator. We hope that if any customer faces trouble, he’ll look into it.”
At the end of June this year, Islami Bank’s total assets and liabilities stood at around BDT 2.40 trillion. Of this amount, customers had deposits of roughly BDT 1.64 trillion in the bank. The bank had conversely invested (loaned) about BDT 1.88 trillion. Nearly half of this distributed loan is now classified as non-performing. S Alam Group alone extracted about BDT 800 billion in loans from the bank under various names and fictitious entities, according to the Bangladesh Bank audits.