Bangladesh Bank (BB) on Tuesday formed a working committee led by Deputy Director Kabir Ahmed to expedite the planned merger of five Islamic banks.
The banks in question are First Security Islami Bank, Global Islami Bank, Union Bank, EXIM Bank, and Social Islami Bank.
The committee is tasked with developing an action plan to implement the merger of these banks into one, to be named the Union Islamic Bank.
Bangladesh Bank has said the merging process is moving swiftly, with the protection of depositors' funds being a top priority, and is expected to be completed by mid-November this year.
Earlier this week, the finance ministry approved a draft merger proposal by the BB to consolidate the process, reports UNB.
"Every task related to the bank merger is progressing fast. The major concern was ensuring the required capital for the process. Since it has already been decided that the new bank will be state-owned and the financing has been approved, we expect the merger to be completed by November," Bangladesh Bank spokesperson and Executive Director Arief Hossain told UNB.
"Once the merger is completed, small depositors will be paid first if they wish to withdraw. Large depositors have nothing to fear since the government is taking responsibility for their funds. However, we urge them not to rush for withdrawals," Arief added.
The decision to merge these five debt-ridden banks was announced publicly by Bangladesh Bank Governor Ahsan H Monsur at a briefing in mid-June.
First Security Islami Bank and Global Islami Bank are fully owned by S Alam Group, and Union Bank is partially owned by the conglomerate.
Over the past 15 years, S Alam Group and its affiliates have allegedly borrowed thousands of crores of taka under various names from these banks, contributing significantly to massive loan defaults.
According to data from Bangladesh Bank, the five banks have a combined default loan amount of approximately Tk 1.47 lakh crore, accounting for about 77% of their total outstanding loans.
Among them, Union Bank is in the most critical state, with 98% of its loans in default, followed by First Security Islami Bank at 96%, Global Islami Bank at 95%, Social Islami Bank at 62%, and EXIM Bank at 48%.
Officials have acknowledged that one of the major challenges could stem from potential lawsuits filed by opponents of the merger.
However, the central bank remains confident that the process will proceed without disruption, as per the UNB report
However, an official told UNB, "The governor has made it clear that if any case is filed, it will be handled through the attorney general's office. Bangladesh Bank is ready for all kinds of legal battles."
After completing the merger, all five banks' boards of directors will be dissolved immediately, followed by Bangladesh Bank forming a new board and initially taking charge of operations until a final governance structure is chalked out.
No final decision has yet been made regarding the future of employees at the five banks or whether their widespread branch networks will be consolidated, reports UNB.
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