Islami Bank Bangladesh PLC, the country’s largest private sector bank, is heading toward a major ownership overhaul as it has sought a Tk 6,000 crore equity investment from the government to resolve its severe capital crisis.
Under the proposal, if the government or state-owned institutions provide this investment, the state’s stake in the bank would rise to 78.8 percent, effectively bringing the private commercial bank under government control.
The initiative aims to bridge the bank's capital deficit, strengthen its financial foundation, and prevent previous owners from regaining influence. Bangladesh Bank has forwarded the proposal to the Financial Institutions Division of the Ministry of Finance to seek government consent.
According to the ‘Capital Restoration Plan 2027-2033’ submitted to Bangladesh Bank on April 4, the bank proposes issuing 600 crore new ordinary shares with a face value of Tk 10 each through private placement. This would elevate the bank's paid-up capital from Tk 1,609.99 crore to Tk 7,609.99 crore.
On November 9, Bangladesh Bank's Banking Regulation and Policy Department (BRPD) sent a letter to the Finance Ministry secretary detailing the proposal and noting that strategic government participation in the bank's capital falls under government jurisdiction.
Bank officials explained that opening the new shares to private investors could allow the previous ownership group to repurchase shares and re-establish influence. Seeking government investment is intended to simultaneously reduce the capital deficit and dilute the previous group's stake, with the possibility that the government could sell the shares to general investors once the bank's financial health improves.
Alongside the government investment proposal, the bank's board decided on November 4 to increase its authorized capital from Tk 2,000 crore to Tk 10,000 crore, while also keeping the prospect of foreign strategic investment under consideration.
The move comes amid a sharp downturn in the bank's financial condition. During the first nine months (January–September) of the current calendar year, Islami Bank recorded a net post-tax loss of Tk 3,303 crore, contrasting with a profit of about Tk 79 crore in the same period last year. In the third quarter (July–September) alone, the bank incurred a loss of Tk 1,976 crore.
Consequently, the bank's Net Asset Value (NAV) dropped to Tk 3,584 crore as of September 30, down from Tk 6,963 crore a year earlier. The bank has not distributed any dividends to shareholders since 2023 and is currently categorized under the 'Z' group on the stock market.
Central bank data shows that total loans stood at Tk 181,860 crore at the end of September, of which Tk 100,600 crore had turned into non-performing loans (NPLs). The provision shortfall stood at Tk 85,886 crore.
The financial crisis deepened after Chattogram-based S Alam Group took control of the bank in 2017, during which time large sums were allegedly siphoned off under various names and accounts, totaling around Tk 100,000 crore. Following the political change on August 5, 2024, S Alam Group lost control, and an administrator appointed by Bangladesh Bank took over management. Shares linked to S Alam-associated entities were subsequently frozen by court orders, leaving the remaining shares in the hands of general and institutional investors.
The proposal to establish majority government ownership in Islami Bank has drawn mixed reactions from economists.
Former Bangladesh Bank Governor Ahsan H. Mansur expressed opposition to state ownership, arguing that bringing a major private bank under government control could introduce operational inefficiencies and governance risks. Pointing to the performance weaknesses of existing state-run banks, he warned that state control could damage the bank's reputation and risk losing the Tk 6,000 crore investment within a few years. Instead, he suggested bringing back former foreign shareholders or seeking new strategic foreign investors alongside rigorous regulatory oversight.
Conversely, Dr. Fahmida Khatun, Distinguished Fellow at the private research organization Centre for Policy Dialogue (CPD), emphasized that the proposal requires careful evaluation.
She noted that the bank's true capital situation and asset quality must be properly assessed prior to any investment, and Bangladesh Bank must play an active role in restoring and sustaining the bank's financial viability.