There is now an uncomfortable rush at bank branches in Dilkusha, Motijheel, and Gulshan in Dhaka. Customers line up from dawn, some with worried eyes, others with chequebooks in hand.
Some are unable to withdraw money despite coming back day after day. Counters at some once top-ranked private banks have now become symbols of fear. According to Bangladesh Bank's latest data, deposits in these banks have fallen by up to 21 percent in just one year as default loans hit record levels.
Yet, the overall picture in the banking sector stands in stark contrast.
From June last year to June this year, total deposits in the country's banking sector increased by about 8.04%. In June 2024, deposits stood at around Tk 18.71 lakh crore. By June this year, deposits rose to over Tk 20.21 lakh crore.
The interim government directly intervened to resolve the banking crisis. Actions ranging from mergers to the formation of new boards, everything moved at a rapid pace.
Explaining why some banks were facing angry lines of customers even though overall deposits were on the rise, Arif Hossain Khan, Bangladesh Bank spokesperson, explained, "Many people are withdrawing deposits from one bank and placing them in another."
He also reassured customers that deposits in all banks were safe.
Panic among customers
Yet, panic prevails.
Last Thursday, a crowd of depositors had gathered outside Social Islami Bank's principal branch in the capital's Motijheel in the afternoon.
Upon closer inspection, it was found that many depositors had gathered after they could not withdraw the sums they demanded. A lucky few had managed to withdraw Tk 5,000-10,000, but most were returning empty-handed.
Kamrul Hasan, a depositor, told Stream, "I have been depositing money for the past five years. The term of the fixed deposit scheme has now matured. But they are not returning either the principal amount or the interest. They keep asking for more time. No one can say when we will get our money back."
Such scenes, which were visible last week at various branches of National Bank, EXIM Bank, First Security Islami Bank, Global Islami Bank, and Union Bank, have become all too familiar after the political changeover in August last year.
During the Awami League's tenure, four of these five banks had been forcibly taken over by the S Alam Group, whose owner was a close ally of ousted prime minister Sheikh Hasina.
It is alleged that such politically-backed individuals drove many banks to ruin in order to feed their own greed, taking large loans under various names with no intention of repayment. A significant portion of the siphoned money has allegedly been laundered abroad.
Panicked customers have been crowding these banks daily to withdraw their deposits since the political changeover.
Top five banks in terms of deposit decline
A review of the deposit balances of private banks from July last year to June this year shows that Social Islami Bank and National Bank experienced the most substantial decrease in deposits in one year.
Following behind are Exim Bank, First Security Islami Bank, ICB Islamic Bank, Global Islami Bank, Modhumoti Bank, and Union Bank.
Social Islami began to spiral in 2017, after the S Alam Group seized control of the board. After Belal Ahmed, son-in-law of S Alam chairman Saiful Alam, was installed as chairman, the bank became mired in severe irregularities and corruption.
After the fall of the Awami League government, the central bank reconstituted its board.
Domestic and foreign audits revealed that 62% of the bank's loans had turned sour.
An inability to return money to depositors has also fuelled a crisis of trust. Consequently, as of last June, deposits had fallen to Tk 27,660 crore. In one year, the bank lost 21.48% of its deposits.
The managing director of Social Islami Bank, Shafiuzzaman, said, "The money lent out is not being recovered. That's why we are facing trouble returning money to depositors."
Another bank that has become engulfed in crisis is National Bank, which had long been under the control of the notorious Sikder Group.
During that time, the S Alam Group, Beximco Group, Maisha Group, Sikder Group, and several other Awami League-backed business groups withdrew funds from the bank, according to a Bangladesh Bank report on the country's top defaulters.
After the regime change, BNP Vice-Chairman Abdul Awal Mintoo was appointed to the bank's leadership.
Despite the change in leadership, the bank remains unable to curb bad loans, with default loans reaching 64% of its total lending.
As of last June, deposits declined to Tk 34,278 crore – a 14.94% drop in one year.
Another similar case is that of EXIM Bank's, which came under the control of former chairman Nazrul Islam Majumdar soon after its founding.
Throughout the tenure of the Awami League government, Majumdar also served as the chairman of the Bangladesh Association of Banks (BAB).
Awami League-backed businesses were allowed to freely access loans from EXIM bank.
Now, the bank is unable to recover those loans. 48% of the loans have turned sour.
The current government changed the board, but no improvement has followed. As of last June, its deposits dropped to Tk 38,257 crore — a 14.75% decline.
Throughout the tenure of the past Awami League government, he served as the chairman of the Bangladesh Association of Banks (BAB).
The chairman of First Security Islami Bank was Saiful Alam, aka S Alam himself.
As of last June, the bank's deposits stood at Tk 40,750 crore. 97% of its loans have turned sour. ICB Islamic Bank, once controlled by Orion Group, saw its deposits drop to Tk 880 crore last June— declining more than 10% in one year. Customers are facing severe difficulty withdrawing money from these banks.
Other Banks with Deposit Decline
Global Islami Bank also collapsed under S Alam's control.
It saw deposits fall to Tk 11,709 crore last June — a 9% decline in one year. 95% of its loans have turned sour. Union Bank, controlled by the same group, saw deposits fall to Tk 18,557 crore, an over 4% decline in one year. 98% of its loans are now classified.
Chairman of Global Islami Bank, Mohammad Nurul Amin, said: "A large portion of the bank's loans have turned sour and are not being repaid. That's why there's trouble in repaying customer funds."
Managing director of Union Bank, Humayun Kabir, said: "A large portion of loans were taken by S Alam. These are not being recovered, resulting in issues with returning money to customers."
Additionally, Madhumati Bank, owned by former Dhaka South City Corporation Mayor Sheikh Fazle Noor Taposh, saw its deposits fall to Tk 7,784 crore last June—a 6.30% drop in one year. No significant irregularities have been found in this bank. The decline in deposits is mainly due to government institutions pulling out funds after the change in government.
Overall Picture
The overall scenario of default loans across the banking sector is alarming.
According to the Bangladesh Bank data, bad loans in the banking sector rose by more than Tk 3 lakh crore in the past year. In June 2024, default loans in the banking sector amounted to just above Tk 2 lakh crore. By June this year, it had soared to over Tk 5 lakh crore for the first time in history.
Many companies that borrowed large sums are now shut. After the regime change, their owners have fled the country. Banks are not getting any response from them. The loan process was designed in such a way that the main culprits could stay beyond accountability.
Union Bank's MD Humayun Kabir said: "S Alam Group took loans in the names of employees. Though the employees are still in the country, they know nothing about the loans. The owners are unresponsive."
What is the government thinking?
Anis A Khan, former chairman of the Association of Bankers Bangladesh, said: "There is no better solution than merging these banks. Globally, this is what is done in similar situations. A merged bank can eventually become a good bank. The merger must be done in line with international standards. The fear among small depositors must be alleviated. In the first phase of the merger, small depositors should be allowed to withdraw their funds."
In early September, the interim government said it would take the initiative to merge five banks. It is considering using public funds to repay the liabilities of small depositors.
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