Imagine losing access to your hard-earned savings due to a banking crisis. Unfortunately, this was the stark reality for many depositors in five struggling Shariah-based banks in Bangladesh. But here's the silver lining: Bangladesh Bank has stepped in with a comprehensive plan to protect depositors and restore financial stability. The newly finalized Bank Resolution Scheme, 2025, outlines a structured approach to reimburse depositors of Sammilito Islami Bank PLC, a newly merged entity formed from the ashes of EXIM Bank, First Security Islami Bank, Global Islami Bank, Social Islami Bank, and Union Bank.
The central bank's intervention became necessary after prolonged irregularities, severe liquidity shortages, and a staggering number of defaulted loans crippled the operations of these five banks. The resolution scheme, obtained by The Business Standard, aims to safeguard depositors' interests while ensuring the merged bank's viability. And this is the part most people miss: the scheme categorizes depositors into different tiers, with varying timelines for fund withdrawal, balancing fairness with the bank's need for stability.
Here’s how it works: Deposits up to Tk2 lakh are fully protected and can be withdrawn anytime under the Deposit Insurance Act. For amounts exceeding Tk2 lakh, the first Tk2 lakh is freely accessible, while additional Tk1 lakh increments can be withdrawn once every three months. Any remaining balance becomes available 24 months after the scheme's start date. But here's where it gets controversial: fixed deposit (FDR) holders with terms of three months or more cannot encash their deposits prematurely; instead, these deposits will auto-renew, with three-month FDRs renewing thrice, one to two-year deposits treated as three-year terms, and deposits over four years locked until maturity.
However, the scheme isn’t without compassion. A bold move: critically ill depositors, including those battling cancer or undergoing dialysis, can access funds beyond prescribed limits based on their medical needs. Additionally, institutional depositors face a unique trade-off: a significant portion of their fixed deposits, totaling around Tk7,500 crore, will be converted into Class-B shares of Sammilito Islami Bank, with potential future dividends. Other institutions and trusts will also see part of their deposits converted into shares.
Why such drastic measures? Bangladesh Bank explains that repeated liquidity injections over the past year failed to stabilize the banks' financial health. Weak governance and mounting defaulted loans left conventional solutions ineffective. Merging the banks under the Bank Resolution Ordinance, 2025, was deemed the only viable path forward. Sammilito Islami Bank now operates with an authorized capital of Tk40,000 crore and paid-up capital of Tk35,000 crore, managed by a seven-member board appointed by the central bank.
Here’s a thought-provoking question: Is converting deposits into shares a fair solution for institutional depositors, or does it unfairly shift risk onto them? Share your thoughts in the comments—we’d love to hear your perspective on this complex yet crucial financial restructuring.
