How corruption, abuse, and regulatory failure sank five banks
Dissolving these banks is only the first step. To make the merger effective, the new entity must strictly follow all rules and regulations, says CPD's Fahmida Khatun
When multiple banks collapse together, it is not just about bad loans or mismanagement. It is about a system that chose to look away while corruption thrived, insiders looted, and the regulator stood by in silence.
Now, in a desperate bid to prevent a total meltdown, the government is merging five of them, pumping in Tk20,000 crore of taxpayers' money – another bailout in a long, weary line that Bangladeshis have seen too many times in the state-run banks.
At the heart of the story lies the regulator – the Bangladesh Bank. Until August 2024, when the Awami League government fell, it was asleep when the S Alam Group quietly took control of seven banks and several non-bank financial institutions. Money was syphoned off through forged documents and paper companies, and yet, no alarm was raised. The watchdog turned into a bystander.
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The pattern of regulatory blindness is not new. Back in December 2016, a little-known company, Armada Spinning Mills, suddenly acquired over 2% of Islami Bank's shares – worth Tk200 crore – and within weeks, installed its representative as the new chairman of the country's largest Shariah-based bank. The Bangladesh Bank and the Anti-Corruption Commission looked the other way. No one asked what Armada was or where it got so much money.
Fast-forward to July 2023: Armada Spinning, along with Kingsway Endeavors and Uniglobe Business Resources, offloaded their entire holdings – over 9% of Islami Bank's shares – worth hundreds of crores of taka. By then, the trail of money had gone cold, and the regulators had long moved on.
Insiders in the banking industry were aware of the activities taking place within First Security Islami Bank, another institution effectively controlled by the S Alam Group. Funds were being syphoned off, particularly from its Chattogram zone – the Group's stronghold. Everyone in the sector knew, everyone whispered, yet the Bangladesh Bank remained silent. Its primary duty – to safeguard public deposits – was forgotten in the fog of political influence and fear.
Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD), said unless accountability is restored within the regulator's office and the insiders and political patrons behind these banks are barred from involvement, the cycle will continue. "Once again, the burden will fall on taxpayers as the government will have to inject around Tk35,000 crore into these five weak banks to make the merger happen," she told TBS.
"Dissolving these banks is only the first step. To make the merger effective, the new entity must strictly follow all rules and regulations," she added.
Fahmida noted that mergers and acquisitions are complex even in developed economies that have the institutional capacity and the commitment to enforce regulations.
"The Bangladesh Bank must closely monitor the merged bank, even after the national elections, to ensure that new vested quarters cannot take undue advantage," she warned.
When the Awami League government was ousted in August 2024, the banking sector was already reeling from soaring non-performing loans (NPLs), and thousands of crores of taka were syphoned off from these institutions through loan scams by influential business groups such as S Alam Group.
Four of the five Islamic banks set for merger – First Security Islami Bank, Union Bank, Global Islami Bank, and Social Islami Bank – were under the control of S Alam Group. The fifth, Exim Bank, was controlled by Nassa Group Chairman Nazrul Islam Mazumder, who is now behind bars.
The central bank has already conducted asset quality reviews (AQRs) of the five banks through global audit firms, which revealed NPLs 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.
Deposits in these banks slowed sharply while they struggled to meet withdrawal demands. Their share prices have plummeted over the past year following last year's political change, hitting a record low (up to 73%) in September this year.
In October, Bangladesh Bank Deputy Governor Nurun Nahar said these banks were "not in such dire straits prior to 2017", but their condition deteriorated rapidly after the takeovers.
She cited large-scale money laundering, repeated breaches of single-borrower exposure limits, and politically influenced policy support as key reasons behind their collapse.
By the time the interim government took office in August 2024, banking sector reform had become one of its most urgent challenges. The Bangladesh Bank dissolved the boards of many weak banks and freed them from the grips of influential groups.
After over a year of talks and assessments, the Bangladesh Bank approved in September this year a proposal to consolidate the five lenders into a single institution, which would become the country's largest bank with assets of roughly Tk2.20 lakh crore.
Yesterday, the central bank dissolved the boards of the five banks and appointed administrators to the banks, ahead of the merger.
Five Banks' assets and liabilities
Exim Bank: As of September 2025, total liabilities stood at Tk58,162 crore, excluding shareholders' equity. Of this, Tk36,662 crore comprised deposits and other liabilities – Tk 17,314 crore as term deposits and Tk12,415 crore as mudaraba deposits. Assets included Tk4,579 crore in government and other securities and Tk54,348 crore in general investments, mostly loans to the private sector and bills purchased.
Union Bank: The bank has not yet published its 2024 financial statements or 2025 half-yearly reports. Its Q3 2024 report (ending September) showed total assets of Tk30,315 crore, including Tk1,019 crore in stock investments and Tk27,876 crore in loans to industries. Total liabilities were Tk28,715 crore, including Tk22,966 crore in deposits and other liabilities and Tk170 crore in bonds.
First Security Islami Bank: As of June 2025, total assets were Tk67,859 crore, with general investments (mostly industrial loans) of Tk62,432 crore and fixed assets of around Tk1,300 crore. Total liabilities were Tk41,299 crore, largely term deposits of Tk27,884 crore from individual and institutional clients.
Global Islami Bank: At the end of September 2025, total assets stood at Tk18,562 crore, including Tk14,667 crore in investments, mostly loans to industries. Liabilities totalled Tk22,745 crore, including Tk12,504 crore in deposits (Tk10,640 crore in term deposits) and Tk205 crore in fixed assets.
Social Islami Bank: As of September 2025, total assets were Tk46,129 crore, with Tk2,606 crore in government securities and shares and Tk38,682 crore in loans to industries. Liabilities amounted to Tk45,801 crore, including Tk27,985 crore in deposits from individual and institutional clients.
