The fracas over appointment of a chairman to the Islami Bank Bangladesh PLC exposes the disconcerting fact that financial institutions in this country are yet to come of age. Why should its customers---if they are really so--- organise a protest rally opposing a new chairman and demanding reinstatement of the outgoing one? If the clientele of a sick bank arranges such a programme over uncertainty of getting their deposited money back, it is quite understandable. But this bank risks no such financial mishaps and therefore depositors should remain unconcerned about any reshuffle at the helm of affairs. In fact, common customers are unlikely to be knowledgeable about the calibre of a top functionary of a bank. The organised protest smells rat. It is intriguing and smacks of some motivated game plan.
The protesters have complained that the newly appointed chairman had connection with notorious money launderer S Alam. This is a serious allegation. Now the question is if there is any truth in this or it is politically motivated to malign the man. The bone of contention here is the section 18A of the Bank Resolution Act,2026. This contains the controversial clause---one that allows former owners and shareholders of distressed or merged banks to reclaim their ownership by initially paying an upfront amount of a minimum of '7.5 per cent of the total funds injected by the government'. The rest '92.5 per cent of the injected fund can be paid over two years at a 10 per cent simple interest rate'. Is there any evidence of using this provision for the appointment of the new chairman? If this has not happened, there is no ground for raising accusing fingers at the appointment of the chairman. He served the Bangladesh Bank and is not known to be a shareholder of the Islami Bank Bangladesh PLC.
This, however, does not exhaust the option of controversy. He can be a political appointee to draw wrath of another contending party. If the management of a bank is politicised, it bodes ill of not just the bank concerned but of the entire banking sector. Ideally banks---nationalised or private---should be developed as financial institutions without any room for political manoeuvre. What devastating consequences political interference with the banking affairs can lead to is best exemplified by the collapse of the five Islami banks now merged together.
Like educational institutions, banks should as well be left alone to be efficiently handled by highly experienced professionals. Institutionalisation of banks is possible only when legal provisions and policies guarantee the required independence of the management. The Bank Resolution Act, 2026 with the 18A clause goes against this banking objectivity or neutrality in both spirit and substance. So, the International Monetary Fund (IMF) has been clamouring not for nothing. A thorough and comprehensive banking reform is well in order now in the interest of institutionalisation of the sector. The undesirable development at the Islami Bank Bangladesh PLC confirms that banking in the country is in a dire need of reform. Governance of banks has to follow the rules of law in order to eliminate once and for all the emergence of future S Alams. The 18A clause of the Bank Resolution Act, 2026 should be struck out.
Undesirable developments at Islami Bank Bangladesh
FE Team | Published: June 03, 2026 20:43:43
Undesirable developments at Islami Bank Bangladesh
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