Merging Six Troubled Banks in Bangladesh: A Step Toward
Financial Stability
Table of Contents
1. Introduction
2. Why These Banks Are Being Merged
3. Merger Plan and Legal Framework
4. Status of the Banks
5. Flowchart of Merger Process
6. Challenges
7. Implications
8. Recommendations
9. Conclusion
10. References
Introduction
Bangladesh’s banking industry has long served as a key driver of
economic growth. However, the sector has become increasingly
vulnerable due to irregular lending practices, weak governance, and
persistent liquidity crises. In response, Bangladesh Bank unveiled
an ambitious plan to merge six banks—First Security Islami Bank,
Social Islami Bank, Union Bank, Global Islami Bank, EXIM Bank, and
National Bank—as part of a broader strategy to stabilize the banking
sector and protect depositors.
Why These Banks Are Being Merged
Governor Ahsan H Mansur announced on 26 May 2025 that the
merger of six financially weakened banks is necessary due to
irregularities, loan fraud, and mismanagement. Four of these banks
were under the control of the S Alam Group until August 2024. EXIM
Bank was controlled by Nazrul Islam Majumdar, and National Bank
was linked to the Sikder Group. Attempts by the S Alam Group to
take over National Bank further deepened concerns. The merger is
driven by:
• Irregularities and fraud: Significant loan fraud, insider
lending, and misappropriation of funds.
• Severe liquidity crises: Enormous liquidity support extended:
First Security Islami Bank (Tk13,820 crore), Social Islami Bank
(Tk8,573 crore), Union Bank (Tk4,600 crore), Global Islami
Bank (Tk2,336 crore), EXIM Bank (Tk9,500 crore), National
Bank (Tk8,353 crore).
• Capital shortfall: First Security Islami Bank faces a Tk 14,000
crore capital gap, with non-performing loans (NPLs) worth Tk
17,851 crore.
• Systemic risk: These weaknesses threaten financial stability.
Merger Plan and Legal Framework
Bangladesh Bank plans: - Temporary government ownership by July
2025. - Capital injections to raise the capital adequacy ratio to
12.5%-15% within four years. - Future transfer of shares to public
and international strategic investors.
The Bank Resolution Ordinance 2025 enables: - Temporary control
through share transfer orders. - Appointment of administrators. -
Creation of bridge banks to manage failing institutions. -
Restructuring, capital raising, and transfer of assets/liabilities.
Status of the Banks
• First Security Islami Bank: Faced daily deposit outflows
exceeding Tk200 crore after August 2024; gap narrowed to Tk6
crore by May 2025.
• Social Islami Bank, Union Bank, Global Islami Bank, EXIM
Bank, National Bank: Continued reliance on Bangladesh Bank
liquidity support, with boards restructured or under
monitoring.
Flowchart of Merger Process
Audit by EY/KPMG → Share Transfer → Government Ownership →
Capital Injection → Bridge Bank (if needed) → Restructuring → Sale to
Investors
Challenges
• Complex legal and operational integration.
• Restoring confidence among depositors.
• Tracking and prosecuting financial crimes.
• Managing workforce redundancies.
Implications
• Enhanced stability of the banking sector.
• Improved governance and regulatory oversight.
• Boost to the international credibility of Bangladesh’s financial
system.
• Potential model for future interventions.
Recommendations
• Transparent communication of progress.
• Swift legal action against wrongdoers.
• Clear restructuring roadmap with stakeholder input.
• Strategic partnerships to strengthen future operations.
Conclusion
The planned merger of six troubled banks represents one of the
most ambitious banking reforms in Bangladesh’s history. Its
success will depend on decisive implementation, transparency,
and sustained regulatory vigilance to ensure a resilient and
accountable banking sector.
References
• The Business Standard. (2025). 6 troubled banks to be merged
by July, govt to take ownership. Retrieved from
•
Bangladesh Bank. (2025). Press release on bank consolidation
strategy.
Rahman, M. (2024). Governance challenges in Bangladesh’s
banking sector. Dhaka: University Press Limited.
•
International Monetary Fund. (2023). Bangladesh Financial
Sector Stability Assessment.
•
Bangladesh Bank. (2025). Bank Resolution Ordinance 2025.
