The Advisory Council on Thursday approved a proposal to form a new bank by merging five financially distressed Islamic banks, officials said.
The new bank, likely to be named United Islamic Bank, will be established under the Bank Resolution Ordinance 2025.
The Advisory Council, chaired by Chief Adviser (CA) Professor Muhammad Yunus, approved the merger of First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and EXIM Bank into a single entity.
Briefing reporters after the meeting, CA's Press Secretary Shafiqul Alam said no bank employees would lose their jobs, and depositors would retain their funds.
Initially, the bank will operate as a state-owned entity, with ownership gradually transferred to the private sector. "We are hopeful to privatise the bank within the next five years," the press secretary added.
The new Shariah-based bank will have an authorised capital of Tk 400 billion and paid-up capital of Tk 350 billion, of which the government will provide Tk 200 billion as equity. Deposits of institutional depositors worth Tk 150 billion may be converted into capital through a bail-in process.
The merger was necessary as the five banks faced massive non-performing loans (NPLs), with nearly 77 per cent of their credit - around Tk 1.47 trillion - defaulted.
Union Bank leads with 98 per cent defaulted loans, followed by First Security Islami Bank (96 per cent), Global Islami Bank (95 per cent), Social Islami Bank (62 per cent), and EXIM Bank (48 per cent).
These banks, previously controlled by the Chattogram-based S Alam Group, were allegedly mismanaged extensively under the previous regime.
The central bank has already appointed administrators - two executive directors and three directors - to oversee the merger. Once the administrators assume office, the banks' boards will be dissolved, and the merger process into a government-owned Shariah-based bank will begin.
Earlier in September, the central bank had approved a merger plan to stabilise the financial sector and rescue the troubled lenders.
The Advisory Council also gave final approval to the Deposit Protection Ordinance, 2025, which raises the maximum depositor refund to Tk 0.2 million in case of bank liquidation, up from Tk 0.1 million previously.
Also, the Council approved amendments to the income tax, customs, and VAT ordinances for bifurcating revenue administration and policy.
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