In 2014, Arif Hossain, from Mymensingh’s Bhaluka, chose First Security Islami Bank (FSIB) for its prompt and cordial services and its Shariah-compliant offerings. However, in just over a decade, his positive experience turned to frustration.
He was struck by a bolt from the blue in August 2025 when the bank’s financial collapse led to the suspension of payments to customers, including both principal amounts and profits.
Arif, who runs Farming Future Bangladesh, a Dhaka-based firm specialising in agricultural research and consultancy, had opened an account with FSIB’s Mirpur branch.
He found himself in trouble when the firm’s Tk45 lakh balance in a current account, intended for immediate withdrawals, became inaccessible. This forced him to downsize his staff from 15 members to just four and close his rented office.
Arif is not alone in his distress. Nearly a dozen of his relatives, including his elderly cancer-surviving mother and retired father, have also found themselves trapped in FSIB’s failing financial system.
Despite numerous attempts, Arif was unable to withdraw Tk1 lakh for his mother’s medical expenses, ultimately resorting to borrowing funds from other sources.
“I want to believe it was just a nightmare,” Arif told TIMES of Bangladesh. “My mother couldn’t withdraw Tk1 lakh for her treatment a few months back, and I had to borrow to support her.”
This nightmare is a grim reality for more than 33 lakh FSIB depositors, who now watch as their savings grow only on paper, with no ability to access their funds. Customers continue to visit FSIB branches, only to be turned away as the bank’s insolvency worsens.
A recent asset quality review report from Bangladesh Bank, dated 26 August, reveals that 99.5% of FSIB’s loans had gone bad by September 2024.
As of that time, the bank held Tk43,143 crore in customer deposits and over Tk60,915 crore in receivables. However, according to the central bank’s findings, only around Tk305 crore of loans were being regularly serviced.
Investigations by foreign auditors from KPMG Sri Lanka, FSIB’s internal audit team, and the central bank have uncovered how the S Alam Group allegedly siphoned vast sums of customer deposits through fraudulent companies, breaching numerous banking regulations.
Sources within FSIB confirmed that the loans, totaling over Tk40,000 crore, were taken out not in S Alam’s name, but in the names of ghost firms owned by his employees, drivers, and others, using falsified documents. Those responsible are now on the run.
A bank official on condition of anonymity explained the depth of the crisis, “S Alam’s influence is vast. Despite the Islamic Bank’s efforts, they are unable to liquidate assets worth Tk8,000-Tk9,000 crore linked to S Alam.”
According to FSIB’s latest reports, the situation continues to worsen. However, some recovery has been made, with nearly Tk3,000 crore of outstanding loans rescheduled over the past nine months.
Despite these efforts, the default rate remains staggeringly high, with 95% of the loans classified as non-performing at the end of June 2025.
FSIB Chairman Mohammad Abdul Mannan acknowledged that the bank’s condition had made a merger inevitable. “Considering the depositors and the bank’s employees, merger is the only viable path,” he told TIMES of Bangladesh.
Bangladesh Bank spokesperson Arief Hossain Khan commented on the situation, noting the difficulty in locating the defaulters. “A bank with nearly 100% non-performing loans cannot recover. For struggling banks, merging under government control is the only way to restore public trust and revitalize them,” he said.
