Five-way merger to create nation’s largest bank by assets
Bangladesh Bank Order 1972 (Amendment 2025) approved by board; sent to advisory council
Highlights:
- BB-appointed administrators to oversee merger
- The merger will cost Tk35,000cr
- All MDs to remain in place during merger
The Bangladesh Bank board has approved a proposal to consolidate five shariah-based lenders into a single entity, which will become the country's largest bank by assets, at around Tk2.20 lakh crore.
As part of the plan, the central bank will appoint administrators in these banks to oversee the merger process. The proposal now awaits final approval from the government.
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The banks in line for the merger are First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank, and EXIM Bank. Of them, four were controlled by S Alam Group, a Chattogram-based conglomerate that has long been in the spotlight for its grip on multiple financial institutions.
Once complete, the new Shariah-based bank will emerge as one of the country's largest lenders, positioned to rival Islami Bank Bangladesh Limited (IBBL), the current market leader in Islamic finance, said a BB director.
"This is not a short process - it'll take around two years. No jobs will be cut, but salaries may be cut until profitability improves," said the director who attended the board meeting chaired by Governor Dr Ahsan H Mansur today.
The director also said IT integration of the five banks will be a major challenge, but the best system among them may be adopted.
Arif Hossain Khan, the central bank's spokesperson, also confirmed merger development.
The government on 9 September formed an eight-member working committee to draft an action plan for the merger, which central bank officials say will take up to two years to complete. During this period, all managing directors will remain in place, though employees may face salary cuts until profitability is restored.
Senior BB officials said the central bank held separate meetings with each of the five banks, listened to their views, and presented its plan for how they will be merged and recovered.
From 49% to 98.5% NPLs
The BB has already conducted asset quality reviews (AQRs) of the five Islamic banks through global audit firms, a prerequisite for the merger. The AQRs revealed non-performing loans ranging from 49% to as high as 98.5%. All five banks also suffer from massive capital shortfalls and provisioning deficits, making recovery even more difficult.
An audit report on First Security Islami Bank (FSIB) revealed that the bank's total loans amount to Tk60,915 crore, of which Tk58,182 crore are defaulted. In percentage terms, that is 95% of its total loan book – an unprecedented figure in the history of the country's banking sector.
The S Alam Group alone siphoned off nearly Tk40,000 crore through shell and name-only entities. The chairman of FSIB was none other than S Alam himself.
Global Islami Bank chairman Mohammad Nurul Amin disclosed that the bank's loan portfolio stands at Tk14,000 crore, of which Tk12,000 crore was borrowed by S Alam Group through various entities. Most of these loans have defaulted, with collateral covering less than 25% of the exposure.
S Alam also borrowed around Tk6,000 crore from Social Islami Bank, backed by only 35% collateral, the bank's chairman Mohammad Sadiqul Islam said recently.
A Tk35,000cr rescue package
According to the central bank's draft outline, the merger will cost Tk35,000 crore. Of this, Tk20,000 crore will come directly from the government, meaning the money will come from the pockets of taxpayers.
This is not a short process - it'll take around two years. No jobs will be cut, but salaries may fall until profitability improves
Tk10,000 crore will be drawn from the deposit insurance fund, pending legal amendments to use it as a loan. The remaining Tk5,000 crore is expected from multilateral lenders including the IMF, World Bank, and ADB as part of broader financial sector reforms. Even the external funds will ultimately be repaid by taxpayers.
How depositors will be paid
Small savers will be protected through early payouts to safeguard confidence, according to the draft. But large institutional deposits — corporates, state agencies, and others — will be converted into equity in the new bank.
Jobs, salaries: What happens next
As of June 2025, the five Shariah-based banks together employ more than 16,000 people and operate nearly 800 branches nationwide. Employees are worried about their future. A BB director who attended the meeting told TBS there will be no job cuts, but salaries may be reduced until the merged entity turns profitable. Even the managing directors of the five banks will remain in their positions until the merger is completed.
Bangladesh Bank Order 1972 (Amendment 2025) approved by board; sent to advisory council
The draft amendment of the Bangladesh Bank Order 1972 (2025) has been approved by the board. At the same time, it has been decided to send the draft to the advisory council.
A board member told TBS that the draft of the Bangladesh Bank Order has been sent to the advisory council largely as it was prepared. However, instead of two deputy governors as board members, it has been reduced to one. In addition, one new position of independent director has been introduced.
The draft states that Bangladesh Bank's administrative and financial autonomy must be ensured, and that the bank will be accountable only to the National Parliament. No government officials will be included on the eight-member board of directors.
The governor will serve as chairperson of the board. Alongside the governor, two deputy governors nominated by him will serve. The remaining directors will be appointed by the government from a list provided by the governor.
Those nominated as directors must have expertise in fields such as economics, banking, accounting, finance, central banking, trade, industrial risk management, or law, along with at least 15 years of experience.
