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The bank has also failed to maintain the required cash reserve ratio (CRR) with the central bank and has faced difficulty paying depositors due to heavy withdrawal pressure since the start of the month.

According to internal data, Islami Bank’s total deposits fell from Tk 1,84,382 crore on May 31 to Tk 1,80,141 crore on June 7. Facing the pressure, the lender sought Tk 10,000 crore in liquidity assistance from the Bangladesh Bank last week.

On June 12, the central bank Governor Mostaqur Rahman hinted at possible support for the bank at a post-budget press conference.

“The crisis at Islami Bank will be resolved soon. Depositors will not face difficulties in withdrawing their money. If necessary, emergency liquidity support will be provided,” said the governor.

On Sunday, Islami Bank’s management met the Bangladesh Bank governor to discuss the situation.

After the meeting, Md Altaf Hossain told journalists that discussions focused on business and liquidity management following the central bank’s emergency support. He said the newly received funds would be used based on identified needs, including withdrawal patterns, sectoral requirements and projected liquidity needs in the coming days.

He added that Bangladesh Bank’s expert team would review and verify the bank’s data.

HOW INSTABILITY UNFOLDED

On May 24, just as the country was preparing for a week-long Eid holiday, the Bangladesh Bank appointed Md Khurshid Alam, a former deputy governor, as chairman of Islami Bank hours after the previous chairman resigned.

The appointment came as a surprise and triggered immediate concern among stakeholders.

After the Eid holidays, on June 1, a group under the banner of the Conscious Customers’ Forum began protests outside the Islami Bank head office at Motijheel in Dhaka.

On the first working day after the holidays, hundreds gathered there demanding that the Bangladesh Bank cancel the appointment and reinstate former Islami Bank managing director Omar Faruk Khan.

Khurshid was among four senior Bangladesh Bank officials who resigned amid protests by central bank employees shortly after the fall of the Awami League government on August 5, 2024.

The Conscious Customers’ Forum continued its demonstrations, calling for the resignation of the new chairman.

Jamaat-e-Islami’s visible support for the protests, along with statements from senior leaders, suggested strong opposition to the appointment.

The government and opposition have also exchanged allegations over Islami Bank’s role in recent years, including during the last general election.

The home minister told the House that the bank had favoured Jamaat, while Jamaat MPs rejected the claim and demanded the remarks be removed from the record.

The Islamist party is widely believed to have maintained close links with Islami Bank since its establishment in 1983.

At around 10pm yesterday, the central bank dissolved the board of directors of the bank, removing the chairman and all other directors. The central bank appointed its Executive Director Mohammad Zahir Hussain to assume the board’s powers and responsibilities until further notice.

FINANCIAL HEALTH OF THE BANK

Islami Bank currently holds the largest volume of non-performing loans (NPLs) in the banking sector, amounting to Tk 95,629 crore, or 50.88 percent of its total loans.

The bank was taken over by controversial conglomerate S Alam Group in 2017. The group later channelled around 80 percent of the bank’s loans to its own companies and affiliated firms, according to allegations widely documented in the banking sector.

After the fall of the Awami League government in a mass uprising, the bank was freed from the group’s control and is now operating under a board of independent directors appointed under the Bangladesh Bank oversight.

“A large share of the defaulted loans is linked to the S Alam Group, and recovery remains minimal,” the bank’s Acting Managing Director Altaf said.

He added that the bank is trying to recover loans from other borrowers as well, but progress has been slow as even regular customers have become reluctant to repay.