Jamuna Oil loses interest worth billions due to ‘haircut’

State-owned oil company Jamuna Oil has lost interest income worth billions of taka due to an institutional ‘haircut’ decision following the merger of five Shariah-based banks to form the Sammilito lslami Bank PLC.

The company had large deposits in four of the five merged banks. The deposits have now been transferred to the Sammilito lslami Bank.

Recently, Bangladesh Bank decided that no interest would be paid on deposits for 2024 and 2025 held by institutional depositors of the five merged banks. The regulatory authority said the decision was taken in line with international practice in bank mergers. This mechanism is known as ‘haircut’.

As a result of Bangladesh Bank’s haircut decision, Jamuna Oil has been deprived of around Tk 1 billion in interest income in the first six months of the current 2025-26 financial year, which has affected the company’s profit.

An analysis of Jamuna Oil’s half-yearly financial statements shows that the loss of interest income of around Tk 1 billion has reduced the company’s overall profit.

As a listed company, Jamuna Oil on Monday disclosed different information from its half-yearly financial report to investors through the country’s two stock exchanges. The report had earlier been approved at a meeting of the company’s board of directors on Sunday.

According to the financial report, Jamuna Oil earned a profit of Tk 2.17 billion in the first six months of the current financial year (July–December). In the same period of the previous 2024-25 financial year, the company had made a profit of Tk 2.64 billion. This means its year on year profit declined by Tk 470 million or nearly 18 per cent.

In addition to the fall in interest income, the company’s core business also declined slightly.

In the first six months of the current financial year, Jamuna Oil’s operating income or business turnover stood at Tk 890 million, compared with Tk 920 million in the same period last year. This represents a decline of Tk 30 million, or just over 3 per cent.

On the one hand business activity declined, on the other interest income from deposits fell, while bank interest and other financial expenses increased. Taken together, these factors affected the company’s overall profit during the period.

Company sources say that a major source of income for Jamuna Oil and other state-owned oil companies is interest earned on bank deposits. These companies earn several times more from this sector than from their core business.

As a result, when interest income from bank deposits rises profits increase sharply, conversely, when interest income falls for any reason it has a significant negative impact on profitability.

According to the financial statements, Jamuna Oil earned Tk 2.97 billion in interest income on bank deposits in the first six months of the current financial year, compared with Tk 3.8 billion in the same period last year. This means its interest income declined by Tk 830 million year on year.

At the same time, interest on loans and other financial costs increased by more than Tk 70 million. In six months from July to December of the current financial year, the company incurred financial expenses of more than Tk 260 million on this, compared with Tk 190 million in the same period last year.

Jamuna Oil said its profit declined because interest income on deposits held with the Sammilito lslami Bank was not accrued in the second quarter of the current financial year. In addition, interest income accrued in the first quarter was later adjusted (written back).

The company took the decision to adjust interest income on the assumption that, due to Bangladesh Bank’s decision, it would not be possible to realise interest on deposits placed with the Sammilito lslami Bank for several years.

The Sammilito Islami Bank was formed by merging five Shariah-based banks: First Security Islami Bank, Social Islami Bank, Global Islami Bank, union Bank and EXIM Bank. Company sources say Jamuna Oil has large deposits in four of these banks, excluding EXIM Bank.

Alongside the half-yearly report, Jamuna Oil also published its financial statements for the second quarter (October-December) of the current financial year separately. These show a significant decline in interest income during the quarter.

During the October-December quarter in question, the company earned Tk 970 million from interest, compared with Tk 2.2 billion in the same period last year. This represents a year-on-year fall of Tk 1.23 billion, or nearly 56 per cent.

When asked about the issue, managing director of Jamuna Oil, Md Amir Masud told Prothom Alo that instructions had been given to suspend interest on some of the company’s deposits held with the merged Sammilito Islami Bank.

As a result, interest income has declined leading to a fall in profit, he added.