United News of Bangladesh

Bangladesh Bank has reversed a contentious policy that barred depositors of five recently merged banks from receiving profits for 2024 and 2025, following widespread criticism and ethical concerns. The central bank’s move restores interest payouts, easing tensions among affected account holders. Under the new decision, depositors will now receive a 4 percent profit rate for those two years. Starting from the current year (2026), market-based profit rates will apply. Currently, the bank has announced a profit rate of approximately 8.5 percent. The central bank communicated this updated policy via a letter sent to the administrators of the affected banks on Wednesday (January 21). Backtrack on ‘Haircut’ Policy The reversal comes just a week after a January 14 directive which stated that no profit would be applicable to any deposits from January 1, 2024, to December 28, 2025. That letter even suggested that any profit already withdrawn by depositors would be "adjusted" from their principal amount, a process known as a ‘haircut’. The initial announcement sparked widespread outrage. Many depositors gathered at various branches of the newly formed Sammilito Islamic Bank PLC to express their anger. Furthermore, the Central Shariah Board intervened, stating it was ‘not Shariah-compliant’ to shift the burden of embezzlement, caused by the negligence of the banks and the regulator, onto the depositors. The government recently created Sammilito Islamic Bank PLC by merging five Shariah-based lenders—Exim Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank, and Union Bank—that were weakened by massive loan irregularities and embezzlement. These banks hold approximately Tk 1.42 lakh crore in deposits from nearly 76 lakh depositors. Depositors of 5 merged banks can withdraw Tk 2 lakh initially, then Tk 1 lakh every 3 months  In contrast, out of the Tk 1.92 lakh crore distributed as loans, roughly 77 percent has become defaulted. Shariah and Accountability Internal debates within the central bank and insights from Islamic banking experts played a key role in this policy shift. Experts pointed out that: Mudaraba Principles: In Shariah banking, depositors are "Sahib-al-Mal" (capital providers) and the bank is the ‘Mudarib’ (manager). Liability for Negligence While depositors normally share business losses, Shariah standards (specifically AAOIFI standards followed in Bangladesh) dictate that if a loss occurs due to the bank's negligence, misconduct, or breach of trust, the bank alone must bear the liability. By reinstating the profit, the central bank acknowledges that depositors should not be penalised for the systemic failures and financial crimes that led to the banks' instability.

The depositors of five crisis-hit Shariah-based banks in Bangladesh will have to forgo profits on their savings for two years as the central bank moves to stabilise the lenders ahead of a planned merger. Bangladesh Bank has ordered a ‘haircut’ on profits accrued during 2024 and 2025, meaning depositors will not receive any returns for that period and will see their account balances reduced. The directive follows what the regulator described as international resolution practices for distressed banks. Institutional deposits to be converted into shares as Bangladesh Bank finalises 'Sammilito Islami Bank' merger The decision was conveyed on Wednesday through letters sent to administrators of First Security Islami Bank, Global Islami Bank, Union Bank, Exim Bank and Social Islami Bank. The five banks have been merged into a single entity, ‘Sammilito Islamic Bank PLC’. Under the instruction, all deposit accounts must be recalculated based on their status as of December 28, 2025. Any profit credited between January 1, 2024 and December 28, 2025 must be removed, with the final balance determined after applying the prescribed haircut. “To ensure the balanced implementation of the Resolution Scheme, all deposit accounts must be recalculated,” the central bank said in its letter, adding that the process should be completed swiftly. Bank Merger: 'Sammilita Islami Bank' receives final approval Bangladesh Bank officials said the lenders incurred heavy losses over the two-year period, leaving them unable to distribute profits to depositors. Prior to the directive, the banks had offered profit rates ranging from 7 percent to 9 percent on deposits. According to central bank data, the five banks collectively serve about 7.5 million depositors and hold roughly Tk142,000 crore in deposits. Their total outstanding loans stand at around Tk193,000 crore, a large portion of which is classified as defaulted. The move means depositors will lose not only two years of expected earnings but will also experience a direct reduction in their account balances — an unusually severe step in Bangladesh’s banking sector. It follows an earlier decision in which the share value of the five banks was declared zero, wiping out investments held by sponsors and shareholders. Exim Bank was previously controlled by Nazrul Islam Mazumder, former chairman of the Bangladesh Association of Banks. The remaining four lenders were controlled by Saiful Alam, head of the S. Alam Group. Now a writ on the 5 banks' merger filed with HC Both were widely known as close associates of ousted Prime Minister Sheikh Hasina and allegedly held significant shareholdings while securing large loan facilities through various entities. The merger marks one of the most sweeping banking restructurings undertaken by Bangladesh Bank as it seeks to contain systemic risk and restore confidence in the Islamic banking segment.  

Some recent scams in the banking sector has sown distrust and fuelled confusion among clients about getting their full money back when a bank collapses or goes bankrupt.