Five Shariah-based banks declared non-functional

The Bangladesh Bank has dissolved the boards of five financially distressed Shariah-based banks and declared them non-functional ahead of a planned merger to form a new state-owned Islamic bank.

The affected banks are First Security Islami Bank PLC, Global Islami Bank PLC, Union Bank PLC, EXIM Bank PLC, and Social Islami Bank PLC.

The central bank issued letters to the banks on Wednesday (November 5), suspending their board activities effective immediately.

Officials said the institutions will now operate under the Bank Resolution Ordinance, and preparations are underway to establish a new entity titled Samomilito Islami Bank.

The Advisory Council had approved the formation of the new state-owned Islamic bank on October 9 based on recommendations from the Bangladesh Bank and the Financial Institutions Division.

According to central bank data, the five banks have long suffered from liquidity crises, high non-performing loans, and severe capital and provision shortfalls, leaving them effectively insolvent despite repeated liquidity support. Their stock values and net asset positions have also turned negative.