Bangladesh’s financial sector faces intensified scrutiny as the central bank considers merging ten struggling Shariah-based banks weighed down by massive non-performing loans (NPLs). These banks, some reportedly linked to the influential S Alam Group, have defaulted on loans totalling Tk1.3 lakh crore—over 23 percent of their total lending portfolios.
Decades of financial irregularities and poor governance have pushed these institutions to the brink of collapse. Although the central bank has dissolved some boards and infused capital to stabilize operations, confidence among depositors and investors remains low.
To address the crisis, Bangladesh Bank Governor Dr. Ahsan H Mansur has proposed consolidating the ten troubled banks into two larger entities. While the initiative is aimed at minimizing systemic risk and restoring trust, banking experts caution that mergers must be handled with care.
“Mergers should not be forced,” said Dr. Shah Md Ahsan Habib of the Bangladesh Institute of Bank Management. “There must be strategic alignment and operational readiness for such a move to succeed.”
Global Islami Bank Chairman Mohammad Nurul Amin also noted the lack of forensic audits and clear valuations. “Combining several failing banks without due diligence could create a much larger problem,” he warned.
Some experts have floated the idea of converting merged banks into sector-specific institutions, such as those focused on SMEs or the textile industry. However, others remain skeptical, citing Bangladesh’s mixed track record with specialized banks.
In response, the central bank has formed a task force and is drafting a new Bank Resolution Act to guide the merger and acquisition process. Arif Hossain Khan, spokesperson for Bangladesh Bank, stated that outcomes will vary by institution and depend on the new legal framework under development.
As the banking sector awaits policy clarity and the task force’s recommendations, the future of Islamic banking in Bangladesh hangs in the balance.
Bd-pratidin English/ Jisan
