5 troubled banks’ depositors to get up to Tk2 lakh by Dec, but through new account

Highlights

• Depositors must open accounts under Sammilito Islami Bank
• The money will be disbursed from deposit insurance fund
• BB already released insurance fund to new bank
• Governor instructs officials to speed up the process

Depositors of five troubled Shariah-based banks are expected to receive up to Tk2 lakh each from the deposit insurance fund by December, but the money will be disbursed only through newly opened accounts under the merged Sammilito Islami Bank, according to officials of Bangladesh Bank and the new entity.

Sammilito Islami Bank, formed through the merger of the five Shariah-based banks – First Security Islami, Global Islami, Social Islami, EXIM and Union, officially commenced operations on 2 December.

A senior official of the central bank's Bank Resolution Department told TBS that the Bangladesh Bank has already released the insurance fund to the new bank. However, three major challenges remain before disbursement can begin: preparing the bank's core banking software, ensuring error-free verification so that no depositor is mistakenly paid, and completing the process of opening new accounts under Sammilito Islami Bank.

Sammilito Islami Bank Chairman Mohammad Ayub Mia met with Bangladesh Bank Governor Ahsan H Mansur in Dhaka yesterday to review the progress of the merger scheme, depositor payments, and special audit reports of the five banks.

Infographics: TBS

An official present at the meeting said the governor was informed that multiple teams are advancing the merger work. When he enquired about preparations for insured deposit payouts, deputy governors explained the legal and operational processes, adding that preparations were ongoing but not yet complete.

The governor instructed all parties to accelerate the process so that branches can start disbursing some funds immediately and to ensure that all insured payouts are completed by December. He also directed a cautious review of the special audit report of EXIM Bank.

Responding to concerns about IT readiness, the deputy governors said long-term IT integration would take time and that the Bangladesh Bank is considering renting infrastructure temporarily. The governor estimated that full integration may take around three years.

Speaking to TBS, Sammilito Islami Bank Chairman Ayub Mia confirmed that the insurance fund has already been transferred. "Since the money will be paid under the new bank, fresh accounts must be opened in the depositors' names. Each of the five banks being merged will also need accounts under the new structure. This is taking some time, but payments will begin in December," he said.

Ayub added that a board meeting will be held next week and that a new managing director is expected to be appointed within the month.

How depositors will get their money

The Bangladesh Bank is finalising a scheme outlining how and to whom the payments will be made, which will be published before disbursement begins.

Depositors with balances up to Tk2 lakh will be allowed to withdraw their entire amount.

Those with balances above Tk2 lakh will receive a maximum of Tk2 lakh for now. Decisions on the remaining balance will be made later, with profit rates potentially being reset.

This means not all 75 lakh depositors of the five banks will receive their full deposits immediately. The goal is to provide quick relief to small depositors and those with urgent needs.

Eligibility conditions

Depositors must meet several criteria to receive payments. A citizen with multiple accounts in the same bank will receive insurance coverage for only one account, linked to their NID.

Only accounts opened with a valid national ID will qualify. A depositor with accounts in all five banks can receive insurance payouts for each bank.

Depositors with outstanding loans linked to their deposits will not receive payments until loan adjustments are completed.

Tk12,000 crore to be required

The Bangladesh Bank estimates that Tk12,000 crore will be required for the payouts, to be drawn from its Deposit Insurance Scheme. Sammilito Islami Bank's paid-up capital has been set at Tk35,000 crore, of which the government is providing Tk20,000 crore. The remaining Tk15,000 crore will be converted from depositors' funds into equity. The bank's authorised capital stands at Tk40,000 crore. The government's capital and insurance funds have already been released to the new bank.

The new bank has already opened its head office at the Sena Kalyan Bhaban in Motijheel, and the government has appointed a board composed entirely of current and former civil servants.