Advisory Council approves proposal to merge five private banks

The Advisory Council has given in-principle approval to a proposal to merge five private banks into a single Shariah-based bank.

The decision was taken on Thursday, October 9, at a meeting of the Advisory Council presided over by Chief Adviser Professor Dr Muhammad Yunus. The meeting was held at the Chief Adviser’s Office in Tejgaon, Dhaka.

The five banks to be merged into the new bank are First Security Islami Bank, Global Islami Bank, Union Bank, EXIM Bank, and Social Islami Bank.

At the same time, the Advisory Council also approved amendments to modernise the Deposit Protection Act for the banking and insurance sectors.

According to the evaluation report, due to the large volume of classified loans or investments and capital shortfalls of the banks concerned, the Finance Division requested Bangladesh Bank to form a Shariah-based Islamic bank under government ownership through the merger of five of the six banks mentioned. However, as a case over share ownership of ICB Islamic Bank PLC is pending in the High Court, the bank has been excluded from the process.

According to Bangladesh Bank’s report, despite liquidity support provided for more than a year, the financial condition of the banks has not improved; rather, their liquidity crisis has deepened. Capital shortfalls, classified investments or loans and advances, provisioning gaps, and liquidity stress have reached a level where the banks are failing to repay depositors and creditors, creating a crisis of confidence among the public in the banking sector, which poses a threat to the country’s overall financial stability.

As there is no prospect of the five banks returning to normalcy, the Finance Division considers it essential, under the Bank Resolution Ordinance 2025, to bring them into the resolution process immediately in order to restore stability in the financial sector, bring discipline back to banking, re-establish depositor confidence, and ensure sustainable credit flow for economic growth.

The proposed new bank will be run commercially and professionally. Bangladesh Bank further stated that initially, against the proposed authorised capital of Tk 40,000 crore, approximately Tk 35,000 crore would be required as paid-up capital. According to the preliminary plan, Tk 15,000 crore from existing institutional depositors could be converted into equity through a bail-in process, while the government would provide the remaining Tk 20,000 crore as capital.