The government has decided to enlist a new Shariah-based bank formed from the merger of five Shariah-based banks, on the country鈥檚 stock exchange, according to Bangladesh Bank officials.
The new entity will be treated as a completely new bank, issuing fresh shares to investors, while the five existing banks will be delisted once the merger process begins.
Under Section 28 of the Bank Resolution Ordinance 2025, all shares held by current shareholders of the five banks will become void once the merger starts.
Any sale or transfer of those shares will be deemed illegal from that point, the provision said.
Based on the provisions 40 of the ordinance, the existing shareholders of the five banks are unlikely to receive any compensation or shares.
The provisions state that shareholders are only eligible for compensation if the losses incurred through the merger process are greater than those that would have resulted from liquidating the banks.
Since the total liabilities of these banks far exceed their assets, shareholders are not expected to receive a payout, as there is no value left for the owners after settling the obligations.
The finance ministry will register the new bank with the Registrar of Joint Stock Companies and Firms, while its paid-up capital will be determined at an advisory meeting scheduled for October 9.
Following the decision, the finance ministry will apply to Bangladesh Bank for a banking license and then seek direct listing approval from the stock exchange.
The listing would be a part of transferring the bank鈥檚 assets and liabilities to third party from the government.
According to Section 40 of the ordinance, shareholders of the merged banks will receive compensation based on valuations conducted by an independent expert.
The proposed name for the new entity is United Islami Bank Bangladesh.
The five banks set to merge are First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank, and EXIM Bank.
On September 7, the government approved the consolidation plan for these struggling Shariah-based banks, committing Tk 20,200 crore in budgetary support to facilitate the process.
The total estimated capital injection, including government funds and other instruments, is Tk 35,200 crore. Of that, Tk 15,000 crore will come through bank deposit insurance and shares to be issued in favour of state-run institutions against their deposits in these banks.
The move is part of the government鈥檚 broader effort to implement the Bank Resolution Ordinance 2025, which empowers the central bank to take control of weak institutions, transfer assets, and form bridge banks to maintain financial stability.
A six-member subcommittee headed by Bangladesh Bank deputy governor Md Kabir Ahmed has been formed to implement the merger.
The merger marks the first large-scale attempt to restructure Shariah-based banks in Bangladesh and is being seen as a critical test of the government鈥檚 commitment to restoring confidence in the banking sector, which has been shaken by repeated loan scams and rising defaults.
The collapse of these banks has largely been attributed to massive lending to S Alam Group through multiple fronts. Investigations revealed that the group received more than 1 lakh crore in loans, much of which have turned into defaults, creating severe liquidity stress.
As a result, these banks have struggled to honour withdrawal requests, forcing the regulator to step in.
