A Tk 6,000 crore state investment would hand the government 78.8 percent ownership of Islami Bank

Islami Bank, once known as the largest and strongest private-sector bank in the country, is now in deep financial crisis. To recover, the bank has sought an equity investment of Tk 6,000 crore from the government. If the proposal is implemented, 78.8 percent of the bank's ownership could pass into government hands, increasing state control over it.

Even under government ownership, however, there are doubts about whether the bank's long-standing crisis will end. Those concerned say that alongside capital injection, reforms in governance, loan recovery and management are essential.

Dr Moinul Islam, a former professor of economics at the University of Chittagong, said on Saturday that Islami Bank was severely damaged under the management of the previous, ousted Awami League government and has not yet fully emerged from that danger. In his view, it is not possible to say right now how effective the move to bring the bank under government ownership will be; more time is needed for observation before a final comment.

Sources say Islami Bank submitted a “Capital Restoration Plan 2027-33” to Bangladesh Bank on April 4 this year. It proposes raising Tk 6,000 crore by issuing 600 crore new ordinary shares with a face value of Tk 10 each. This would raise the bank's paid-up capital from Tk 1,609.99 crore to Tk 7,609.99 crore.

In response to the proposal, Bangladesh Bank's Banking Regulation and Policy Department wrote to the Financial Institutions Division of the Ministry of Finance on November 9, asking whether the government or government institutions agree to the investment. The central bank said the decision on the government's strategic participation in a bank's capital falls within the government's jurisdiction.

The bank's top executives believe that if the government agrees to the proposal, it will create an opportunity to reduce the capital shortfall for now. Implementing the 2027-2033 capital restoration plan could pave the way to strengthening the bank's financial foundation.

About 82 percent of Islami Bank's shares are still owned by the Chattogram-based industrial group S Alam Group and its interest-related entities. The bank's financial condition deteriorated after control passed to S Alam Group during the previous Awami League government. The group and 24 of its related entities acquired between 81.59 and 81.92 percent of the bank's shares. Those shares are currently frozen by court order.

Bangladesh Bank Executive Director and spokesperson Arif Hossain Khan said that under the Bank Company Act, a single person or institution cannot hold more than 10 percent of shares, yet the S Alam-linked ownership in Islami Bank is far higher, and there is also an issue of benami shareholding. He said there are court directives on the ownership of these shares and Bangladesh Bank has maintained the status quo accordingly; the shares will not be frozen, blocked or encashed to give any special group an opportunity to adjust its loans.

Asked what would happen to the frozen shares if the government makes a new investment, Arif Hossain Khan said whatever directive the court gives on the matter will be followed.

The picture of Islami Bank's financial distress also appears in its financial report for the first nine months of this year. From January to September, the bank's net loss after tax was Tk 3,303 crore, of which Tk 1,976 crore was lost in the July-September quarter alone. In the same period of 2025, the bank had made a profit of about Tk 79 crore.

According to Bangladesh Bank data, as of September 30 the bank's total loans stood at Tk 181,860 crore, of which Tk 100,600 crore had turned into defaulted loans. At the same time, the provision shortfall stood at Tk 85,886 crore. The bank's capital adequacy ratio has also fallen from about 12.5 percent to about 6.5 percent. Its share price on the stock market has fallen too—from Tk 44.02 per share at one time to Tk 23.40.

Spokesperson Arif Hossain Khan said there is no alternative to fresh capital to rescue Islami Bank from its current fragile state, which is why the bank has approached the government. But the final decision on accepting or rejecting the Tk 6,000 crore investment proposal rests with the government. He said the share issuance against capital injection could apply in the same way not only to Islami Bank but also to other banks in crisis.

Senior economist and former Bangladesh Bank chief economist Dr Mustafa K Mujeri, however, believes fresh capital alone will not be enough. He said the bank's true asset position must first be assessed, defaulted loans recovered and good governance established; only then should the necessary capital and liquidity be arranged. Instead of giving money directly from the budget or financing by printing new money, he suggested considering special bond issues, interbank liquidity support from strong banks including Sonali Bank, and, if needed, a consolidated structure like a combined Islamic bank. Most important, he said, is ensuring accountability in management, fixing responsibility for past irregularities, restoring depositors' trust and taking effective measures for loan recovery; without these reforms, uncertainty will remain over whether the long-standing crisis will end even if ownership passes to the government.