Bangladesh Bank dissolves Islami Bank board amid ongoing turmoil

Amid intense political controversy involving both the government and opposition, Bangladesh Bank has dissolved the board of directors of Islami Bank Bangladesh PLC. At the same time, the central bank has appointed its Executive Director, Mohammad Zahir Hussain, to oversee the bank’s operations.

In a statement issued on Sunday, Bangladesh Bank said that, under the Bank Company Act, the appointments of the bank’s chairman and all directors had been cancelled in the interests of depositors and the public. Under Section 47(3) of the law, Mohammad Zahir Hussain has been entrusted with exercising all powers and responsibilities of the board.

The central bank said he will lead the bank’s management until further notice. The move represents a major intervention in the bank’s administration amid continuing protests over the appointment of its chairman. Earlier on Sunday, Bangladesh Bank Governor Mostaqur Rahman met with the bank’s managing director and other senior officials.

Meanwhile, Bangladesh Bank provided Islami Bank with a special loan of Tk 25 billion on Sunday to ease its liquidity crisis. The funds were credited to the bank’s current account with the central bank, allowing its cheque-clearing operations to return to normal, according to sources at both institutions.

Speaking to reporters after an emergency meeting with Bangladesh Bank, Acting Managing Director Altaf Hossain said customers’ difficulties in withdrawing funds would soon ease. He said discussions focused on the bank’s liquidity situation, fund management, and financial planning for the coming days.

All five directors, including the chairman, had been appointed by Bangladesh Bank as independent directors. On 24 May, former chairman M Jubayedur Rahman resigned, and later that day former Bangladesh Bank deputy governor Md Khurshid Alam was appointed as an independent director and chairman. His appointment subsequently became the subject of controversy.

Since then, a group of customers under the banner of the Socheton Grahok Forum (Conscious Customers Forum) has been staging protests, demanding the removal of the newly appointed chairman and pressing a seven-point charter of demands. The issue also sparked heated exchanges between government and opposition lawmakers in Parliament.

Protesters have held demonstrations outside the bank’s head office in Dhaka’s Dilkusha area. Bangladesh Jamaat-e-Islami declared its support for what it described as customers’ “legitimate” movement. As a result, withdrawals increased significantly, prompting the bank to seek Tk 100 billion in support from Bangladesh Bank. The central bank initially provided Tk 25 billion on Sunday morning.

On Sunday afternoon, the bank’s managing director, two additional managing directors and six deputy managing directors met senior officials of Bangladesh Bank, including Governor Mostaqur Rahman. According to a statement issued by the central bank, officials of Islami Bank Bangladesh PLC briefed the governor on the bank’s ongoing situation.

Speaking to reporters after the meeting, Acting Managing Director Altaf Hossain said the bank had received an average of about Tk 12 billion in deposits and recorded a similar amount in withdrawals on each of the past two days.

Cash deposits and withdrawals are now roughly balanced, although some difficulties remain in withdrawals processed through the online cheque-clearing system.

Asked whether discussions with the central bank had touched on the ongoing customer protests or the controversy surrounding the bank’s chairman, Altaf Hossain said, “There was no discussion beyond business matters. The management focused primarily on banking operations and restoring normal customer services.”

Addressing concerns among customers, he said there was reason for reassurance. Service quality is being improved continuously, and customers would receive better services from Monday. He expressed confidence that the current difficulties would soon be resolved and that customers would be able to withdraw their funds without disruption.

Protest at Bangladesh Bank

On Sunday morning, a group of customers under the banner of the Conscious Customers Forum again staged a sit-in outside the bank’s head office in Dhaka’s Dilkusha area, reiterating their seven-point demand, including the resignation of the chairman. The group also announced plans to submit a memorandum to the governor on Tuesday.

Their demands include an investigation into the process through which the bank’s ownership changed, measures to protect the rights of its legitimate owners, the establishment of a special tribunal to investigate irregularities and alleged embezzlement in the banking sector, and legal action against those found responsible.

In 2017, the S Alam Group, a business conglomerate closely associated with the then Awami League government, gained control of Islami Bank through shares purchased directly and through proxy entities in the stock market. Following the fall of the Awami League government during the student-led mass uprising of August 2024, the bank was freed from the group’s control. Since then, representatives appointed by Bangladesh Bank have been overseeing its operations. More than 50 per cent of the bank’s loan portfolio is currently classified as non-performing.