Bangladesh Bank has decided to appoint administrators to oversee the merger of five struggling Shariah-based private banks into a single state-owned Islamic bank.

The decision was taken at a special board meeting chaired by Bangladesh Bank Governor Dr Ahsan H Mansur on Tuesday at the central bank headquarters, with other board members present.

A senior central bank official told UNB that office orders will soon be issued to appoint the administrators and dissolve the existing boards of the affected banks.

He said amendments to the Bank Resolution Ordinance and other supporting laws will be introduced as needed to facilitate the process.

Each bank will be assigned an administrator supported by a team of four officers.

The initiative aims to safeguard depositors’ funds and restore public confidence in the banking sector.

According to the government’s plan, First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and Exim Bank will be consolidated into a new state-owned entity, provisionally named United Islami Bank.

Bangladesh Bank plans five-bank merger by November

The central bank is expected to issue a licence for the new bank soon.

Bangladesh Bank officials believe the merger will help end long-standing irregularities and corruption in the Islamic banking sector, while restructuring is expected to rebuild customer trust.

Following the merger, the existing boards of directors and managing directors will be dissolved, and the shares of the merged banks declared void.

All assets and liabilities will be transferred to the new entity, which will begin operations as United Islami Bank.

To recover government investment, shares of the new bank will eventually be sold to the private sector. Large depositors may be given the option to convert part of their deposits into shares, while small depositors will face no restrictions on withdrawals.

A forensic audit revealed defaulted loans at the five banks ranging from 48 to 98 percent. The central bank estimates Tk 35,200 crore will be required for the merger, with Tk 20,200 crore to be provided by the government.

Eight-Member committee formed to merge five sharia-based banks

Four of the banks -- First Security, Union, Global, and Social Islami -- have long been under the control of the S. Alam Group, while Exim Bank is owned by Nazrul Islam Majumder, Chairman of the Nassa Group.