STAR BUSINESS REPORT

The interim government has approved the merger of five troubled shariah-based commercial banks into a new state-run Islamic lender named Sammilito Islami Bank Limited.

A meeting of the advisory council chaired by Chief Adviser Professor Muhammad Yunus approved the proposal yesterday.

After the meeting, Chief Adviser’s Press Secretary Shafiqul Alam told a press briefing at the Foreign Service Academy that no employee of the merging banks would lose their job and no depositor would lose their savings.

The five banks to be merged are First Security Islami Bank, Union Bank, Global Islami Bank, Social Islami Bank and Exim Bank.

Alam said two names had been proposed for the new entity, United Islami Bank Limited or Sammilito Islami Bank Limited.

Under the merger process, all assets and liabilities of the five troubled banks will be combined into the new lender. All five are listed on the stock exchange.

The Bangladesh Bank said the new bank will have an authorised capital of Tk 40,000 crore, with a paid-up capital requirement of Tk 35,000 crore, according to the chief adviser’s press secretary.

As per the preliminary capital plan, around Tk 15,000 crore in institutional deposits from existing depositors could be converted into equity through a bail-in process. The remaining Tk 20,000 crore would be provided by the government as capital support, said Alam.

Of this, the government will inject Tk 10,000 crore in cash and raise another Tk 10,000 crore by issuing Sukuk -- shariah-compliant financial instruments similar to bonds.

The merger initiative initially involved six banks, but ICB Islamic Bank was excluded because of an ongoing case with the High Court over its ownership structure.

Alam said the new state-run shariah-based bank will assume all assets and liabilities of the five merging lenders and continue regular operations.

At the beginning, the Finance Division will hold ownership of the bank on behalf of the government. This stake will gradually be transferred to the private sector, he told reporters.

According to the plan, the bank will bring in a The