The Bangladesh Bank has finalized a decision to merge five financially weakened Shariah-based private banks into a single state-owned entity. Administrators will be appointed this week to oversee the process, led by a senior central bank official, supported by four additional officers.
The five banks set to be merged are First Security Islami Bank, Union Bank, Global Islami Bank, Social Islami Bank, and EXIM Bank. Initially, they will form a new state-owned bank, likely to be named “United Islami Bank.” The government will inject Tk 20,000 crore in fresh capital, while the central bank’s Deposit Insurance Trust will provide another Tk 15,000 crore.
Bangladesh Bank spokesperson Arif Hossain Khan stated that the consolidation process may take up to two years. Although administrators will be appointed, they will not immediately replace existing boards. Instead, the boards will gradually become inactive, and under banking resolution laws, they will be dissolved once the merger is completed.
An audit by international firms revealed that nearly 77% of the loans distributed by these banks have turned non-performing. Union Bank was identified as the worst performer, with almost 98% of its loans classified as defaulted.
The central bank confirmed that licensing procedures for the new state-owned bank are underway. Over time, domestic and foreign investors, as well as development partners, will be invited to join. Collectively, the five banks currently operate 779 branches, 698 sub-branches, 500 agent outlets, and more than 1,000 ATMs, employing nearly 16,000 staff.
Officials emphasized that the consolidation plan is part of a long-term roadmap aimed at restoring stability to the banking sector, curbing irregularities, and recapitalizing the industry.
