In a move that’s set to shake up the financial landscape, Bangladesh is about to witness the birth of its largest state-run Islamic bank, following the final approval to merge five Shariah-based banks into a single entity named 'United Islami Bank.' But here's where it gets controversial: the merger, costing a staggering Tk35,000 crore, will be largely funded by taxpayers, raising questions about the financial burden on the public. The approval, granted on November 30, 2025, at a board meeting of the Bangladesh Bank, officially clears the path for the new institution to begin operations, marking a significant milestone in the country’s banking sector.
The five banks involved—First Security Islami Bank, Global Islami Bank, Union Bank, Exim Bank, and Social Islami Bank—have been under scrutiny for their financial troubles. Earlier, on November 9, the Ministry of Finance issued a Letter of Intent (LoI), the initial green light for the merger, after the government completed regulatory steps, including securing a name clearance and opening the bank’s current account under the Bank Company Act. And this is the part most people miss: while small savers will be protected with early payouts to maintain confidence, large institutional deposits will be converted into equity in the new bank, a move that could spark differing opinions among stakeholders.
According to central bank officials, the merged bank can now formally start operations, with detailed guidelines on depositor payments, profit rates, salary structures, and other operational issues expected soon. Ordinary depositors will be allowed to withdraw up to Tk2 lakh, prioritizing small depositors during the initial settlement phase. However, the funding structure is where the debate heats up: Tk20,000 crore will come directly from the government (taxpayers’ pockets), Tk10,000 crore from the deposit insurance fund (pending legal amendments), and Tk5,000 crore from multilateral lenders like the IMF, World Bank, and ADB—funds that taxpayers will ultimately repay.
On November 5, the central bank took control of the five banks, dissolving their existing boards and appointing administrators from the central bank. The managing directors were also asked to resign, signaling a complete overhaul of leadership. While the merger aims to stabilize the financial sector, it begs the question: Is this the best use of public funds, or could there be more equitable ways to address the banks’ troubles? We’d love to hear your thoughts in the comments—do you think this merger is a step in the right direction, or is there a better way forward?
