Central bank to bring merged Islamic banks under full new management by Aug 15
In a Nutshell:
- The five troubled Shariah-based banks were merged in late 2025 into Sammilito Islami Bank, after boards were dissolved and BB officials appointed as administrators in November 2025.
- Exim Bank's administrator was withdrawn first, on 30 July 2026, since the merged entity's new managing director operates from Exim Bank's office as the principal administrative base.
- The phased handover follows the appointment of a permanent chairman and managing director for Sammilito Islami Bank, making continued administrator oversight administratively redundant.
- Loan, deposit, and IT integration across the five banks is largely complete, though core banking software, IT infrastructure, and nostro account integration for international transactions remain unfinished.
- Some operations will continue under the individual banks' original names until technology integration is fully completed.
- Separately, Bangladesh Bank has moved to scrap the controversial "haircut" on deposits, restoring original contractual profit rates for 2024-2025 before a 6.5% ceiling applies from 2026.
- The merged bank launched with Tk35,000 crore in paid-up capital — Tk20,000 crore from the government and Tk15,000 crore to be converted into shares against depositor funds.
- Before the merger, Exim Bank was linked to former banking association chief Nazrul Islam Mazumder, while the other four were controlled by the S Alam Group, both tied to the previous Awami League government.
Why it matters
This transition marks a critical inflection point in Bangladesh's post-2024 financial sector cleanup, testing whether the interim and subsequent governments can convert a politically fraught rescue into a functioning, credible institution. The five banks collapsed under default rates of 60-95% after years of politically connected lending under the S Alam Group and Nazrul Islam Mazumder networks, making their resolution a bellwether for how Bangladesh addresses crony-capital legacies inherited from the Hasina era. Handing operational control to permanent management — rather than temporary administrators — signals a shift from crisis containment toward normalization, which matters for depositor confidence, international creditor perceptions, and the broader banking sector's stability. The unresolved technology and nostro account integration also carries real economic stakes, since disruptions to international transaction channels could affect trade financing and remittances during the transition window. Success here would bolster confidence in Bangladesh's capacity for institutional reform amid political transition; failure, as Sammilito's chairman himself warned, risks broader financial instability with knock-on effects for the economy. The case also sits within a larger regional and global pattern of post-crisis Islamic bank consolidations, where governance credibility often matters more than capital injections alone.
What we think
Bangladesh's policymakers should weigh the risk of declaring victory prematurely against the genuine need to normalize governance and end costly administrative duplication. While withdrawing administrators reduces bureaucratic overhead and clarifies accountability lines under the new chairman and MD, doing so before IT and nostro account integration is complete could create operational gaps — particularly around international settlements — that erode depositor and correspondent-bank trust during a sensitive rebuilding phase. The government should also consider how the parallel decision to scrap deposit "haircuts" interacts with this handover: restoring original contractual rates strengthens depositor goodwill but raises questions about fiscal sustainability given the state's Tk20,000 crore stake. Longer-term, authorities need a clear roadmap for transitioning Sammilito Islami Bank toward private and potentially foreign ownership, as the central bank governor has previously signaled, since prolonged state control could recreate the same politically insulated governance failures that caused the original crisis. Finally, given the banks' origin in politically directed lending, Bangladesh should prioritize transparent asset-quality reporting and independent audits during this transition to prevent recurrence and to reassure both domestic depositors and international investors watching this as a test case for post-Hasina financial sector reform.