In a move to stabilise Bangladesh’s ailing Islamic banking sector, Bangladesh Bank has decided to dissolve the boards of five Sharia-compliant banks slated for merger, paving the way for the creation of a new state-owned entity: “United Islami Bank.”

The decision was finalised at a high-level board meeting chaired by Governor Dr Ahsan H Mansur on Tuesday, following months of mounting pressure to address systemic corruption, governance failures, and staggering loan defaults crippling the institutions.

According to a Bangladesh Bank spokesperson, the existing boards of First Security Islami Bank, Social Islami Bank, Global Islami Bank, Union Bank, and Exim Bank will be formally abolished once the merger process concludes.

In their place, administrator teams of up to five members each, appointed directly by the central bank, will assume full operational control.

The move follows detailed discussions on the Bank Resolution Ordinance, Bangladesh Bank Order, and strategies for recovering defaulted loans, which have reached catastrophic levels, ranging from 48% to 98% across the five institutions.

Under the government’s directive, the five banks will be consolidated into United Islami Bank, a new state-owned Islamic financial institution. Bangladesh Bank will issue its operating license “in due course,” but the bank will only commence official operations after all assets and liabilities are fully transferred and reconciled.

The merger carries a staggering price tag: Tk 35,200 crore ($3.1 billion) — of which the government will inject Tk 20,200 crore to cover capital shortfalls and bad debt write-offs.

For years, four of the five banks — First Security, Social Islami, Global Islami, and Union Bank — operated under the shadow of the S Alam Group, while Exim Bank was controlled by NASA Group Chairman Nazrul Islam Majumder. Both conglomerates are now under intense regulatory and legal scrutiny for alleged financial manipulation and loan scams.

Earlier this month, Bangladesh Bank met with chairmen and directors of the banks. While First Security, Union, and Global agreed to merge, Exim and Social Islami requested more time — a request the central bank flatly denied.

“The time for negotiation is over. The priority is depositor safety and systemic stability,” said a senior central bank official.

Bangladesh Bank emphasized that all depositors — large and small — will be protected:

Small depositors can withdraw funds at any time without restriction.

Large depositors and institutional investors may be offered shares in the newly formed United Islami Bank after stabilization.

All existing board and MD positions will be vacated, and current shareholdings declared null and void — effectively wiping the slate clean.

Officers and employees will be retained under new management structures, with assurances of job security during the transition.

Once the new bank is stabilized — likely within 2–3 years — Bangladesh Bank plans to gradually reintroduce private ownership by offering shares to strategic investors and large depositors. The goal: transform United Islami Bank into a professionally run, transparent, and competitive Islamic financial institution.