7.5M Customers Trapped in Crisis at Merged Islamic Bank
Graphics: Agamir Somoy
Eight months after the launch of Consolidated Islami Bank through the merger of five Shariah-based banks crippled by large-scale looting and irregularities, millions of depositors and businesses remain in distress. The government's decision initially raised hopes among customers and businesses, but those expectations have largely faded. While depositors have received up to Tk 200,000 from their accounts, there is no clarity on when they will receive the remainder. Businesses, meanwhile, cannot secure new loans to open letters of credit (LCs), settle outstanding import bills, or transfer mortgaged assets to other banks. As a result, 7.5 million customers continue to suffer.
Sources said Consolidated Islami Bank remains unable to settle LC liabilities. Although one LC bill was recently paid with support from the central bank, the bank continues to seek extensions for other payments without being able to honor its commitments. Social Islami Bank Limited (SIBL) faces a lawsuit in the United States seeking to freeze its nostro account over unpaid LC obligations, while legal action has also been initiated against at least two other banks. Foreign banks have imposed additional charges and, in some cases, become reluctant to enter into LC agreements with Bangladeshi banks. As a result, the country's reputation has suffered and normal import-export activities have been disrupted.
Sources said the total value of outstanding LC liabilities exceeds $3 billion. In May, authorities settled two major LC bills to protect the country's reputation.
Consolidated Islami Bank Chairman Kazi Shairul Hasan confirmed the lawsuit involving SIBL's frozen account. He said the bank had hired a law firm to handle the case. He warned that confidence in the banking sector was declining because of unpaid LC liabilities and stressed the need for joint efforts to resolve the crisis. Otherwise, he said, the central bank's ratings could suffer. He added that technical teams were working to stabilize the institution and that restoring depositor confidence remained the bank's top priority.
Documents show that Consolidated Islami Bank emerged from the merger of five banks devastated by unprecedented corruption and financial misconduct. Authorities plan to stabilize the bank first and then gradually recapitalize it. Integrating the core banking software systems of the five merged banks remains one of the biggest challenges. Relevant departments are working to complete the necessary technological integration as quickly as possible.
Under the restructuring plan, EXIM Bank's head office may become the headquarters of Consolidated Islami Bank, while Union Bank's Gulshan branch will serve as another key operational center. The bank's paid-up capital has been set at Tk 35,000 crore, including Tk 20,000 crore from the government and Tk 15,000 crore from depositors' shares. Its authorized capital has been fixed at Tk 40,000 crore.
According to Bangladesh Bank, the five merged Shariah-based banks, First Security Islami Bank, Social Islami Bank, Union Bank, Global Islami Bank and EXIM Bank, hold combined deposits of Tk 152,546 crore from 7.5 million customers. Of that amount, individual depositors account for Tk 46,000 crore, while institutions hold the remaining Tk 106,000 crore. The banks' combined loan portfolio stands at Tk 195,413 crore, including nearly Tk 147,000 crore in non-performing loans, equivalent to 77 percent of total loans.
Former Bangladesh Bank Chief Economist Mustafa K Mujeri said authorities must prioritize small depositors. He warned that unless depositor fears are addressed, it will be difficult to make the new bank successful. He also cautioned that unpaid LC obligations abroad could further damage the country's reputation and increase costs for importers.
Former Bangladesh Bank Governor Dr. Ahsan H. Mansur formally inaugurated Consolidated Islami Bank on December 4. Three days later, authorities began returning up to Tk 200,000 to customers of the five merged banks. As of May 31, only 918,000 customers had received a total of Tk 4,678 crore from the Deposit Protection Fund. Promised repayments at three-month intervals have yet to materialize. Depositors also remain unable to withdraw the 4 percent profit or interest accrued on their deposits.
Stock market analysts said public shareholdings stand at 65 percent in First Security Islami Bank, 31 percent in Global Islami Bank, 18 percent in Social Islami Bank, 29 percent in EXIM Bank and 18 percent in Union Bank. However, ordinary shareholders have suffered heavy losses, with the share prices of all five banks falling below Tk 5 against a face value of Tk 10.
