Out of the total TK1.52 trillion in deposits across five banks, TK46,000 crore is from individual depositors.
September 21, 2025, 07:15 AM
Last revision: September 21, 2025, 07:29 AM
Illustration: TBS
Highlights:
- Five Islamic banks merge into Bangladesh’s largest asset entity.
- Priority given to individual depositors; institutions may receive shares.
- Insurance payments capped at TK2 lakh, to be paid within 2 months.
- Deposits over TK2 lakh will have gradual repayment, offering a 4% provisional return.
- Capital support from government and lenders totals TK35,000 crore.
- Banks will be delisted, with shareholders facing potential losses and compensation options.
The Bangladesh Bank has proposed a plan to protect depositors from five Islamic banks, which will unite as the country’s largest bank by assets.
Together, these banks hold TK1.52 trillion, with around TK46,000 crore, roughly one-third, sourced from individual depositors, according to the Bank of Bangladesh.
Depositor priorities:
Central bank officials indicated that individual depositors will be prioritized for repayments, while institutional depositors may receive shares in the newly merged entity. The projected plan aims to secure insurance payments of TK2 lakh, as provided by updates to the Deposit Protection Act, within two months after the bank’s license is revoked.
Deposits exceeding TK2 lakh will be repaid gradually, though the timeline for this remains uncertain. During the merger, there could be a return of 4% set for depositors, but existing deposit schemes will be eliminated. If individuals hold multiple accounts across the banks, they will be considered one account for insurance purposes, which is capped at TK2 lakh.
Loanholders, on the other hand, need to maintain their installment schedules, with defaults still subject to penalties.
Ultimately, the success of the repayment plan hinges on the approval of the proposed amendments to the Deposit Protection Act.
All five banks are listed on the Dhaka Stock Exchange (DSE) and will be dissolved following the merger.
Capital support for the new bank:
The merged entity will have assets amounting to TK2.20 trillion, with the capital coming from the government, the Deposit Insurance Fund, and multilateral lenders totaling TK35,000 crore. Taxpayers will ultimately shoulder some of these external funds.
The banks involved in this merger are Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank, and Exim Bank. Notably, most are affiliated with the S Alam group, which has faced scrutiny for managing financial institutions.
The Bank of Bangladesh will appoint managers to replace the current directors of these institutions and ensure active management during this transition.
The fate of general shareholders:
As these banks are set to merge, shareholders generally won’t receive compensation if there’s liquidation. Still, the Bangladesh Bank is exploring ways to address compensation for them, as advised by the Ministry of Finance.
Meetings are planned with the Bangladesh Securities and Exchange Commission (BSEC) to clarify the abolition process and compensation possibilities for general shareholders. Currently, these shareholders have suffered considerable losses, with share prices across all banks significantly down, each below TK5 against a face value of TK10.
This decline, affecting 36 listed banks, highlights a lack of investor confidence in the sector. For instance, while Brac Bank performs well with shares above TK70, even more stable banks like Citibank are faltering.
Administrator role:
The Bank Resolution Ordinance enables the Bank of Bangladesh to directly manage operations under the prompt corrective action framework, or via appointed administrators.
These managers will assess financial situations, uphold stability, and potentially replace key executives as necessary. Announcements regarding these appointments will be made publicly through national media and the banks’ official websites.
In the case of Islamic banks, it’s crucial that administrators possess Sharia-compliant financial expertise to ensure appropriate management.
