How some banks regained depositors’ confidence after board reconstruction

Out of the 14 troubled banks that experienced board reconstruction after regime change due to severe corruption, at least six have gradually been regaining depositors' confidence in the last few months. 

However, some of them are still seeking liquidity support from the Bangladesh Bank to continue customer payments as unusual withdrawal pressure eased but not fully stopped, according to banks. 

The Business Standard found that deposits at IFIC, UCBL, Exim, and NRB have grown rapidly in recent months due to customer confidence regaining after the board reconstruction. 

For instance, IFIC Bank receives Tk6,000 crore in new deposits after board reconstruction. 

When talking with The Business Standard, Md Mehmood Husain, chairman of IFIC Bank said, "Our deposits dropped from Tk50,000 crore to Tk44,000 crore. But by the end of October 2023, outflows had stopped. By April this year, we had recovered over Tk6,000 crore, bringing us back to Tk50,000 crore in deposits—and we did it entirely with our own capabilities, without any financial support from the central bank."

EXIM Bank Chairman Md Nazrul Islam Swapan said the bank has overcome its image crisis, which stemmed from the poor reputation of former chairman Nazrul Islam Mazumder, who led the bank for 24 years. "Since the new board took over on 5 August, deposits have grown by Tk8,200 crore in just eight months," he noted.

UCB Managing Director and CEO Mohammad Mamdudur Rashid shared a similar turnaround. "We collected Tk4,000 crore in deposits in all of 2024. In just the first four months of 2025, we've already matched that. We've also added two lakh new customers, growing our base by 10%."

NRB Bank Managing Director Tarek Riaz Khan said, "We raised Tk738 crore in deposits in 2024. But in just four months of 2025, we've already crossed Tk800 crore. Despite some pressure on our institutional segment after the board reshuffle, retail deposits remained steady, showing our customers' trust."

National Bank and First Security Islami Bank (FSIB) are taking steps to regain depositor confidence.

"We're still struggling with poor management and liquidity issues," said National Bank Chairman Abdul Awal Mintoo. "But we're working to turn things around within six months. Continued regulatory support is essential."

FSIB Chairman Mohammad Abdul Mannan said, "In the last eight months, we've gained nine lakh new customers and secured Tk3,700 crore in fresh deposits."

After board restructuring, daily deposit net outflow-inflows reach a near-equilibrium position, he said. The bank plans to invest in SMEs in the same areas where deposits are collected, he added.

Bangladesh Bank has reconstructed the board of 14 banks after 15 August, including Islami, Social Islami, IFIC, UCBL, Exim, First Security, Al-Arafah Islami, Global Islami, Union, National, NRB, NRBC, Meghna and BCBL. 

The boards of some banks were reconstructed due to a lack of good governance, and some were for weak health. Despite having good financial indicators, the boards of Al-Arafah Islami, NRBC, Meghna, NRB, Exim, UCBL, and IFIC were reconstructed due to a lack of good governance, according to banks.  

However, a major concern now is the rise in default loans, as previously hidden bad assets are being revealed, which will significantly impact their profitability. 

The central bank is considering provision forbearance support if needed once the full extent of default loans becomes clear.  

At a recent event, the Bangladesh Bank governor instructed banks not to obscure the true picture, even if the industry's average default loan ratio rises to 30%.  

The Bank Resolution Act was enacted to take action against non-viable banks

Bangladesh Bank has enacted the Bank Resolution Act to facilitate mergers and acquisitions, as several banks face slim chances of survival.

The new ordinance gives the central bank sweeping powers to act against weak banks, including appointing temporary administrators, raising capital, transferring shares and liabilities, setting up bridge banks, and even selling failing institutions.

At a recent event, Governor Ahsan H Mansur warned, "Not all banks will survive. In some cases, 87% of a bank's deposits were handed to a single family."

To support restructuring efforts, Bangladesh Bank is now working to establish a resolution fund.

Of 14 banks previously influenced by the S Alam Group, at least three are unlikely to survive. Over 80% of their deposits are linked to a single business group with ties to ousted Prime Minister Sheikh Hasina. The group's chairman, Mohammed Saiful Alam (S Alam), is currently living abroad, and banks have been unable to recover funds from him.

Governor Mansur also said the Islamic banking sector would undergo major reform. Smaller struggling Islamic banks are likely to be merged to create larger, more competitive institutions.

"There's one large Islamic bank and many small ones — several in trouble. We plan to merge them to form two strong Islamic banks that can compete," he said at the 10th Annual Banking Conference 2025, organised by the Bangladesh Institute of Bank Management on 9 April.