The government will not allow the return of controversial owners to five troubled Islamic banks. According to responsible sources in the Ministry of Finance and Bangladesh Bank, a decision in principle has been taken to repeal the provision of the Bank Resolution Act that allowed such a possibility.
The government formed by the Bangladesh Nationalist Party (BNP) turned the Bank Resolution Ordinance, introduced by the interim government, into law on 10 April. Before the law was passed in Parliament, a new section titled 18(A) was added.
This section states that those who were shareholders of a bank before it came under resolution may later apply to Bangladesh Bank to regain shares, assets, and liabilities of that bank. Bangladesh Bank may also allow any other suitable person to take this opportunity.
However, applicants must commit to fulfilling various conditions, including returning all funds provided by the government or Bangladesh Bank.
After the inclusion of the new provision in the Bank Resolution Act, controversy arose. Opposition parties in parliament said that this clause was added to return control of banks to controversial businessmen such as S Alam.
Under the interim government’s ordinance, on 2 December last year, five banks—EXIM Bank, Social Islami Bank, First Security Islami Bank, Union Bank, and Global Islami Bank—were merged and started operations as the Sammilito Islami Bank. Among them, EXIM Bank was owned by the Nassa Group, while the other four were controlled by the S Alam Group.
Former lead economist of the World Bank Dhaka office, Md. Zahid Hussain, told Prothom Alo that the repeal of section 18(A) would be a good news.
However, it should be seen whether it is fully repealed or whether something new is added in its place, he remained cautious.
Why it is being repealed
Sources in the Ministry of Finance said there are mainly two reasons behind the decision to repeal the controversial provision of the Bank Resolution Act. One is that the government has faced criticism, and the other is objection from the World Bank.
According to sources in the division, the committee’s recommendations did not include any provision for the return of former owners to banks. Bangladesh Bank was also not aware of it. The 18(A) provision was added at the last moment before the bill was tabled in parliament.
Multiple sources in the Ministry of Finance and Bangladesh Bank’s top level said that if the provision remains, there would be uncertainty regarding the receipt of at least US$1.65 billion in loan assistance from the World Bank. The government plans to use this money for strengthening the central bank’s capacity, reducing non-performing loans, financial sector reforms, and importing fertiliser and fuel.
When asked whether any conditions regarding the Bank Resolution Act were attached to the loan assistance, World Bank Bangladesh and Bhutan Division Director Jean Pesme said in a written statement on Tuesday that dialogue between the World Bank and Bangladesh is ongoing.
He further said that a strong and adequately capitalised banking sector, financial sector stability, and private sector-led job creation are important for Bangladesh. In this context, the legal framework on bank resolution must be aligned with international best practices.
This is essential for effectively addressing the problems of weak and undercapitalised banks, Jean Pesme stated.
79pc of loans are defaulted
During the tenure of the Awami League government, which was ousted in the July mass uprising in 2024, massive amounts of money were siphoned off in the name of loans and were not repaid, weakening around 10 banks. The Bank Resolution Ordinance was issued on 25 May 2025 to merge five of those severely troubled banks.
I cautiously welcome this policy decision of the government. The caution is because there are also some controversial examples in bank appointments in the banking sector.TIB Executive Director Iftekharuzzaman
The combined non-performing loan (NPL) amount of these five banks is about Tk 1.47 trillion, which is around 79 per cent of their total disbursed loans. Union Bank has the highest NPL ratio at 98 per cent. 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.
Meanwhile, the BNP government has approved 110 of the 133 ordinances issued by the interim government. Some ordinances were amended during passage, including the Bank Resolution Ordinance.
One and a half months after forming the BNP government, a 10-member committee, headed by Md. Azim Uddin Biswas, Additional Secretary of the Financial Institutions Division of the Ministry of Finance, was formed on 1 April to review the ordinance.
According to sources in the division, the committee’s recommendations did not include any provision for the return of former owners to banks. Bangladesh Bank was also not aware of it. The 18(A) provision was added at the last moment before the bill was tabled in parliament.
The provision was criticised not only by opposition political parties but also by economists, Transparency International Bangladesh (TIB), and the Bangladesh Association of Banks (BAB).
After the law was passed, TIB said in a statement that the opportunity created for the rehabilitation of former shareholders of weak banks could again expose the banking sector to corruption and looting risks.
BAB leaders met Bangladesh Bank Governor Md Mostaqur Rahman on 11 May and expressed their concerns about the provision.
However, there were differing opinions. Some argued that merging banks would require huge government expenditure, and instead, transferring banks to other “non-controversial” owners could reduce financial pressure on the state.
While introducing the law in parliament, Finance Minister Amir Khasru Mahmud Chowdhury also said that the government does not have the capacity to rescue troubled banks using state funds. That is why this opportunity was included.
The new bank formed by merging five banks has a capital of Tk 350 billion. Of this, the government will provide Tk 200 billion. In addition, Tk 75 billion from Bangladesh Bank’s deposit insurance fund, built from contributions of banks and financial institutions, will be converted into shares. The remaining Tk 75 billion is planned to be converted into shares from institutional deposits of banks.
People from banking sector said that the government may have to provide more money to rescue the merged bank.
“Cautious appreciation”
Sources in the Ministry of Finance said that the decision to repeal the controversial provision is still at the policy level. Once the government gives approval, the Ministry of Finance will begin the process. An amendment to the law will be required for repeal. It is not yet known whether the amendment will be placed in the budget session of Parliament.
Speaking about this, TIB Executive Director Iftekharuzzaman told Prothom Alo, “I cautiously welcome this policy decision of the government. The caution is because there are also some controversial examples in bank appointments in the banking sector.”
He said that the controversial provision should have been repealed as an independent decision of the government, not under any external condition, as it contradicts the BNP government’s election manifesto and the spirit of the July Charter.