Depositors with less than Tk 200,000 in the five banks undergoing the merger process will be refunded first.
The refund process for these depositors will begin once administrators are appointed to the banks and government funds are injected.
Those with deposits of Tk 200,000 or less will be allowed to withdraw the full amount at once. Depositors with larger amounts will be repaid in phases.
This refund plan is part of Bangladesh Bank’s initiative to merge five Shariah-based banks into a single institution.
The merger process will begin after administrators are appointed. According to sources at Bangladesh Bank, the appointment of administrators is expected to be finalised within this month.
The five banks involved in the merger initiative are: First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and EXIM Bank.
Of these, the first four were under the control of the S Alam Group, while EXIM Bank was under the control of Nazrul Islam Mazumder, chairman of the Nassa Group.
Bangladesh Bank has already finalised the action plan to merge the five banks. A new bank named "United Islami Bank" will be formed by merging these five institutions.
The proposal for the formation of this new bank is expected to be presented for approval to the government’s advisory council within this month.
Once approved, a project office for the bank will be opened at the Sena Kalyan Bhaban in Motijheel, Dhaka.
According to sources within Bangladesh Bank, all liabilities, assets, and personnel of the five banks will gradually be taken over by the new bank. However, there are allegations that the merger process is not being implemented in full compliance with the procedures outlined in the ordinance.
Meanwhile, Bangladesh Bank is placing the highest priority on refunding small depositors after the new bank is formed. Officials from the central bank stated that beginning the refund process will help ease panic among depositors, thereby reducing pressure on the new bank. To ensure that the new bank starts on a solid foundation, the central bank is also focusing on appointing a strong board of directors and a skilled management team.
It has been learned that an initiative has also been taken to amend the Bank Deposit Insurance Act. Under the current law, depositors are eligible for compensation of up to Tk 100,000 only if a bank is liquidated. Since no bank in the country is being liquidated or shut down, steps are being taken to amend the law so that refunds can also be made in the event of bank mergers.
Additionally, a proposal has been made to increase the compensation limit from Tk 100,000 to 200,000. A draft of the amended law has already been submitted to the Financial Institutions Division of the Ministry of Finance.
Officials involved in the bank merger process have said that depositors with more than Tk 200,000 will have to wait to get their money back. Those with large deposits will be offered shares in the new bank instead. Bangladesh Bank is planning to convert 20 per cent of large deposits into shares of the new bank.
Sources also reveal that the five banks involved in the merger are already facing a significant capital shortfall. To address this, the new bank will be established with a capital base of Tk 350 billion (35,000 crore).
Of this, the government will provide Tk 200 billion (20,000 crore), while the remaining Tk 150 billion (15,000 crore) will come from the Deposit Insurance Fund of Bangladesh Bank, which is funded by banks and financial institutions, and through the conversion of institutional deposits into shares.
According to data from Bangladesh Bank, as of May, the combined deposits of the five banks had fallen to Tk 1.365 trillion (136,546 crore). In the same month, their total outstanding loans stood at Tk 1.954 trillion (195,413 crore). The total non-performing loans (NPLs) of these five banks amounted to nearly Tk 1.47 trillion Taka (147,000 crore), which is about 77 per cent of their total loans disbursed.
Former chief economist at Bangladesh Bank, Mustafa K Mujeri, told Prothom Alo that priority must be given to small depositors. "If their fear is not alleviated, it will be difficult to make the new bank a success," he said.