United News of Bangladesh

Bangladesh Bank has reversed a contentious policy that barred depositors of five recently merged banks from receiving profits for 2024 and 2025, following widespread criticism and ethical concerns. The central bank’s move restores interest payouts, easing tensions among affected account holders. Under the new decision, depositors will now receive a 4 percent profit rate for those two years. Starting from the current year (2026), market-based profit rates will apply. Currently, the bank has announced a profit rate of approximately 8.5 percent. The central bank communicated this updated policy via a letter sent to the administrators of the affected banks on Wednesday (January 21). Backtrack on ‘Haircut’ Policy The reversal comes just a week after a January 14 directive which stated that no profit would be applicable to any deposits from January 1, 2024, to December 28, 2025. That letter even suggested that any profit already withdrawn by depositors would be "adjusted" from their principal amount, a process known as a ‘haircut’. The initial announcement sparked widespread outrage. Many depositors gathered at various branches of the newly formed Sammilito Islamic Bank PLC to express their anger. Furthermore, the Central Shariah Board intervened, stating it was ‘not Shariah-compliant’ to shift the burden of embezzlement, caused by the negligence of the banks and the regulator, onto the depositors. The government recently created Sammilito Islamic Bank PLC by merging five Shariah-based lenders—Exim Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank, and Union Bank—that were weakened by massive loan irregularities and embezzlement. These banks hold approximately Tk 1.42 lakh crore in deposits from nearly 76 lakh depositors. Depositors of 5 merged banks can withdraw Tk 2 lakh initially, then Tk 1 lakh every 3 months  In contrast, out of the Tk 1.92 lakh crore distributed as loans, roughly 77 percent has become defaulted. Shariah and Accountability Internal debates within the central bank and insights from Islamic banking experts played a key role in this policy shift. Experts pointed out that: Mudaraba Principles: In Shariah banking, depositors are "Sahib-al-Mal" (capital providers) and the bank is the ‘Mudarib’ (manager). Liability for Negligence While depositors normally share business losses, Shariah standards (specifically AAOIFI standards followed in Bangladesh) dictate that if a loss occurs due to the bank's negligence, misconduct, or breach of trust, the bank alone must bear the liability. By reinstating the profit, the central bank acknowledges that depositors should not be penalised for the systemic failures and financial crimes that led to the banks' instability.

The central bank of Bangladesh has been forced to issue a statement to clear the air, as it were, of the confusion arising out of its initiative to bring about consolidation in the country's ailing banking sector. As a necessary part of the process aimed at reducing the number of banks in the country, the sector is going to witness a number of mergers between previously disparate entities in the coming days. Top execs of merging bank cannot hold posts at acquiring entity: Bangladesh Bank Five merger proposals have already been received and  are expected to be approved by the end of 2024. They involve around 11 institutions, and if completed as proposed, would reduce the number of banks in Bangladesh by 6 - around 10% of the total. Yet the unprecedented nature of these moves in the banking sector, where there is no previous record of two Bangladeshi banks having merged, has led to a state of panic and confusion among members of the public, to the extent that people are reportedly withdrawing their deposits from certain banks, said sources at some respected banks. Bangladesh Bank auctions gold for the first time in 16 years They said most of the depositors are suffering from the dilemma of whether or not to keep money in the bank. Some are withdrawing their money from the banks due to 'fear'. Bangladesh Bank was forced to address the issue in its statement today, asserting that individual as well as institutional depositors' money will remain fully safe and secure in banks during the merger process. Noticing different news and social media posts, the central bank said accountholders of two merging banks will be able to maintain their respective accounts as before even after the completion of the merger. Bangladesh Bank issues detailed directive on appointment of MD, CEO for NBFIs The merger process will be completed based on the consent of the entrepreneurial directors, current boards, and common shareholders of the banks covered by the merger, said the statement.