Proposal to merge 5 Islamic banks gets Advisory Council nod
Initially, the merged institution will operate as a state-owned bank under the ownership of the finance division. The government plans to gradually transfer its ownership to the private sector once the bank stabilises and achieves operational efficiency
Highlights
- Five Islamic banks to merge into one state-owned Shariah-based entity
- Likely name: United Islamic Bank
- No job or deposit losses, officials assure
- Default loans: Tk1.47 lakh crore (77% of total)
- Merger cost: Tk35,000 crore — mostly from govt funds
- S Alam Group linked to four merged banks
The Advisory Council today (9 October) gave its policy approval to merge five distressed Islamic banks into a single Shariah-based state-owned entity, according to sources at the finance ministry.
The council's meeting, chaired by Chief Adviser Prof Muhammad Yunus, endorsed the proposal to form a unified Islamic bank by combining First Security Islami Bank, Global Islami Bank, Union Bank, Exim Bank, and Social Islami Bank.
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Initially, the merged institution will operate as a state-owned bank under the ownership of the finance division. The government plans to gradually transfer its ownership to the private sector once the bank stabilises and achieves operational efficiency.
It will be named United Islamic Bank or Integrated Islamic Bank. Besides, no employees from the merged banks will lose their jobs, and no customer will lose their deposits.
Between September 2023 and May 2025, deposits at these banks fell from Tk1.58 lakh crore to Tk1.36 lakh crore. Loans, however, kept growing, reaching Tk1.95 lakh crore. Default loans ballooned to Tk1.47 lakh crore, an extraordinary 77% of their total loan portfolio. Union Bank's non-performing loan ratio stood at 98%, First Security's at 96%, Global Islami's at 95%, Social Islami's at 62%, and Exim's at 48%.
Burdened by mounting defaults and shaken depositor confidence, Bangladesh Bank stepped in to merge five troubled Islamic banks into a single entity. The central bank says the consolidation is aimed at creating one stronger Islamic bank.
According to Bangladesh Bank's draft outline, the merger will cost Tk35,000 crore. Of this, Tk20,000 crore will come directly from government coffers, meaning taxpayers' money. Another Tk10,000 crore will be drawn from the deposit insurance fund – requiring legal amendments to allow its use as a loan.
The remainder, around Tk5,000 crore, is expected from multilateral development partners such as the IMF, World Bank, and ADB, as part of broader financial sector support.
Of the five banks, First Security Islami Bank, Global Islami Bank, Union Bank and Social Islami Bank were largely controlled by the Chattogram-based S Alam Group, which gradually amassed ownership by buying shares on the secondary market under various company names. The group then placed its nominees on bank boards and secured loans – many of which have since defaulted.
