The instability that has emerged at Islami Bank Bangladesh PLC is unacceptable by any standard. Following the appointment of a new chairman, a series of controversies and ongoing protests have reportedly prompted customers to withdraw more than Tk 50 billion from the bank over the past few days. More worrying is the fact that the issue has now evolved into a political tug-of-war between the ruling party and the opposition.
The Association of Bankers, Bangladesh (ABB), the body representing chief executives of banks, expressed concern over the matter during a bankers’ meeting with the governor on Wednesday.
In response to the situation, Bangladesh Bank has appointed an observer at Islami Bank. We believe that Bangladesh Bank must now urgently pursue a reasonable and broadly acceptable solution to the crisis, rising above political considerations.
The uncertainty surrounding the country’s largest bank has already begun to affect the broader banking sector. Bangladesh Bank should remember that the largest share of the country’s remittance inflows passes through this bank. A prolonged crisis could therefore have a sustained impact on remittance earnings, the exchange rate, liquidity conditions, and interbank relations.
The current crisis began after Bangladesh Bank appointed former deputy governor Md Khurshid Alam as an independent director and chairman of Islami Bank on 24 May.
Following the appointment, a group operating under the banner of the “Conscious Customers Forum” launched a movement demanding his resignation, and some customers began withdrawing their deposits. The movement has received support from the opposition party Bangladesh Jamaat-e-Islami.
On 3 June, the party’s Ameer, Shafiqur Rahman, stated that opposition activists were prepared to take to the streets to protect Islami Bank. The opposition should remember that no bank can belong to any political party. The path it has chosen—seeking to achieve its demands through agitation—is not acceptable.
The ongoing budget session of Parliament has also seen heated exchanges between the ruling party and the opposition over Islami Bank. The ruling party has alleged that funds from the bank were used during the Thirteenth National Parliamentary Election.
We believe that the sweeping allegations raised by the Home Minister have only further muddied the situation. Questions have emerged regarding the credibility of some of the claims. The opposition, meanwhile, has accused the Home Minister of attempting to pave the way for the return of S Alam, who previously controlled the bank.
In reality, it is difficult to argue that Bangladesh Bank exercised sufficient prudence in appointing the new chairman. Furthermore, Section 18(a) of the Bank Resolution Act, passed during the first session of Parliament, generated widespread criticism because it appeared to create a pathway for banks to be returned to their former owners.
Although the government announced plans to amend the provision in response to concerns and protests from various quarters, no amendment has yet been implemented. Taken together, these developments have created confusion among the public regarding the government’s intentions and commitment to banking-sector reforms.
For decades, Bangladesh’s banking sector has been subject to political influence. Party loyalty often took precedence over commercial considerations, turning the sector into a field for unchecked plunder by various individuals and groups. Government statistics themselves indicate that during the Awami League government’s tenure, approximately $234 billion, or Tk 28 trillion, was illicitly transferred abroad.
With the support of the Directorate General of Forces Intelligence (DGFI), the S Alam Group took control of Islami Bank during that period. The current government must remember that any attempt to re-establish S Alam’s dominance in the banking sector under the pretext of facilitating loan repayments would be unacceptable.
Restoring stability to the country’s macroeconomy requires, above all, freeing the banking sector from political influence. The problems surrounding Islami Bank must be resolved without delay. Given that the crisis has now taken on a political dimension, we believe the governor should engage with the Prime Minister and take the initiative to find a solution.
The ultimate objective should be to free the banking sector from political interference once and for all. Ensuring the full autonomy of Bangladesh Bank is also crucial in this regard. Since the appointment of the chairman has become the focal point of the controversy and crisis, his stepping aside could provide a possible pathway toward defusing the situation.