Government approves merger of five Shariah-based private banks

The newly formed bank will be state-owned initially, with plans for gradual privatisation, says CA’s press secretary

The interim government has approved the merger of five financially struggling Shariah-based private banks to form a single new bank.

The banks involved in this merger are First Security Islami Bank, Global Islami Bank, Union Bank, EXIM Bank, and Social Islami Bank.

The merged entity will initially have an authorised capital of Tk 400 billion, with paid-up capital estimated at Tk 350 billion.

Two names have been proposed for the new bank: United Islamic Bank or Sammilito Islamic Bank.

The decision was announced by Shafiqul Alam, press secretary to the chief advisor, following a meeting of the Advisory Council in Tejgaon on Thursday.

He reassured the public that no employees would lose their jobs, and depositors would not lose their funds due to the merger.

As part of the initial plan, Tk 150 billion in institutional deposits will be converted into capital through a "bail-in" process. The remaining Tk 200 billion will be provided by the government as capital.

Initially, the new bank will be state-owned, with plans to privatise it gradually over five years, he said.

Shafiqul said the banks, which had been facing liquidity issues, were evaluated by two consulting firms as part of a reform program aimed at restoring governance and financial discipline in the banking sector.

The evaluation found significant classified loans, capital shortages, and liquidity crises in the five banks, prompting the Bangladesh Bank to recommend the merger to ensure financial stability, he added.

The government formed a working committee on Sept 8 to oversee the merger process.

On Sept 16, the Bangladesh Bank’s board approved the “Resolution Plan Scheme 2025” for the merger, which was subsequently endorsed by the Advisory Council.