Bangladesh Bank has finalized the decision to merge five financially weakened Shariah-based banks into a single entity. To implement the merger, administrators will be appointed to all five banks this week. The role will be taken up by a senior official from the central bank, supported by four additional officers. This administrator team will lead the entire merger process. The decision was made on Tuesday (September 16) at an emergency meeting of the central bank’s board of directors, chaired by Governor Dr. Ahsan H Mansur.

The five banks to be merged are First Security Islami Bank PLC, Union Bank PLC, Global Islami Bank PLC, Social Islami Bank PLC, and EXIM Bank PLC. The first four banks were controlled by S Alam Group, while EXIM Bank’s Chairman was Md Nazrul Islam Mazumder, a businessman closely linked to the ousted Prime Minister Sheikh Hasina.

According to the proposal approved by the central bank board, the merged entity will initially become a new state-owned bank, potentially named “United Islami Bank.” Bangladesh Bank will soon issue a license for this bank. The government will provide BDT 200 billion in capital support, while an additional BDT 150 billion will come as loans from the central bank’s Deposit Insurance Trust Fund (DITF). Other funding sources will also be tapped, and if formed as proposed, this will become the country’s largest capital-based bank.

Bangladesh Bank spokesperson Arief Hossain Khan said the entire process will take about two years for the new bank to take full shape. He stated, “Although the administrator teams will be appointed to the banks, they will not replace anyone in the banks. The current boards of directors and the administrator teams will work jointly. As the administrator teams take charge, the boards will gradually become inactive. There will be no need to dissolve the boards. Once the merger process is completed under the Bank Resolution Ordinance, the boards will automatically be suspended. The entire process could take around two years to finish.”

Bangladesh Bank had given the five banks set to be merged a chance to defend themselves. Hearings on the matter began at the central bank earlier this month, where the banks submitted proposals on how they planned to recover financially. However, after being dissatisfied with the proposals, Bangladesh Bank finalized the merger process at a special board meeting yesterday. Board sources said the merger decision is part of a long-term roadmap. A 10-year plan has been adopted to restructure the banks’ overall management and capital. As the first step, administrator teams will be appointed to these banks. They will work alongside the current boards of directors to reorganize the banks.

Over the past decade and a half, widespread irregularities and corruption under the Awami League government left these five banks in crisis. However, with the help of central bank officials, the banks had been concealing their true condition. Following the Awami League government’s ouster in the student-led mass uprising and Sheikh Hasina’s departure to India on August 5, 2024, the banks’ dire situation came to light. After the Interim Government took power, the central bank provided around BDT 600 billion in liquidity support to save nearly a dozen banks. But as the situation failed to improve, the decision was made to merge the weak banks into a single large bank. To prepare an action plan for implementing this decision, the government formed an eight-member working committee. They will provide policy support to the administrator teams and boards of directors from outside the banks.

Several members of Bangladesh Bank’s board of directors told Bonik Barta that administrators will be appointed to each of the five banks. However, they will not replace anyone on the current boards. All levels of the banks’ existing staff will initially remain in their positions. After the administrator teams take over responsibilities, top-level officials will be relieved of their duties. While no one outside the leadership will lose their job, salaries for everyone will be reduced by 10 to 20 percent. Once the newly formed bank becomes profitable, the cut salaries will be reimbursed.

Governor Dr. Ahsan H Mansur, since taking charge in 2024, has dissolved the boards of 15 private banks. Among them, an asset quality review (AQR) of the five Shariah-based banks was conducted by internationally recognized audit firms. The audits by “Ernst & Young” and “KPMG” were completed in May 2025. According to the AQR report, deposits at the five Shariah-based banks totaled over BDT 1.58 trillion. Their outstanding loans (investments) stood at over BDT 1.91 trillion, of which BDT 1.46 trillion was classified as non-performing. The audit revealed that 76.69 percent of the loans disbursed by these banks had defaulted. The total capital shortfall of the five banks was BDT 745.01 billion.

A review of the data shows that Union Bank has the worst loan default rate among the five banks, with 97.80 percent of its distributed loans classified as non-performing. According to the AQR report, 96.37 percent of loans at First Security Islami Bank and 95.10 percent at Global Islami Bank were also deemed defaulted. In comparison, 48.20 percent of EXIM Bank’s loans and 62.30 percent of Social Islami Bank’s (SIBL) loans were identified as defaulted.

Since the reconstitution of the banks’ boards, the central bank’s Governor has repeatedly stated that the Shariah-based banks weakened by irregularities and corruption would be merged into a single entity, while Islami Bank Bangladesh PLC would remain an independent bank. The two banks would then compete with each other to expand business. To move forward with this plan, Governor Ahsan H Mansur met with the Chairmen and Managing Directors (MDs) of the five Shariah-based banks on June 4. At the central bank meeting, the overall situation of the banks was reviewed, and the merger roadmap was presented. However, EXIM Bank and SIBL opposed the merger after the roadmap was shared, citing several arguments against the move. In the end, the central bank dismissed their objections.

Bangladesh Bank officials said the process of issuing a license for the new state-owned bank is at the final stage. Under this new bank, the deposits and assets of the five merged banks will be transferred. Later, domestic and foreign investors, along with development partners, will be included in the bank’s ownership. The five banks together have 779 branches across the country: First Security Islami Bank has 226, Social Islami Bank has 180, EXIM Bank has 155, Union Bank has 114, and Global Islami Bank has 104. In addition, they operate 698 sub-branches, 500 agent banking outlets, and 1,000 ATMs. The five banks employ around 16,000 people.

When asked about this, Global Islami Bank Chairman Mohammed Nurul Amin told Bonik Barta, “We have heard about the decision taken by the central bank’s board. We are still unclear about what will happen to the boards and top management once administrators are appointed. We expect instructions from the central bank soon.”

He added, “After the board was restructured, we tried to save the bank. We received BDT 25 billion in liquidity support from the central bank. However, loan recovery has been extremely poor because a single group took almost all the loans. They have shown no interest in repaying them.”