In 2025, Bangladesh’s banking sector was finally forced to confront losses long concealed by regulatory tolerance. But the year stopped short of fixing the system’s underlying weaknesses, leaving banks stabilised by emergency action rather than restored by reform.
What 2025 showed most clearly was not reform taking hold, but tolerance running out. Losses that had been kept out of sight for years surfaced as non-performing loans rose, capital weakened, governance failed and liquidity tightened at the same time.
Years of accommodation left deep structural cracks. Strong intervention prevented a collapse, but real repair remained out of reach.
That reality was most visible in the crisis at five Shariah-based banks—First Security Islami Bank, Social Islami Bank, Union Bank, Global Islami Bank and Exim Bank. After the fall of the Awami League government, political change and board reshuffles followed.
Yet by year-end, depositors still could not withdraw their money. Regulators found that asset stripping under the previous regime had already drained these banks, leaving balance sheets beyond recovery. Merging them became a way to contain damage, not a step towards reform.
The scale of the problem was clear. On average, nearly 80 percent of loans at the five banks had turned non-performing, effectively erasing their economic value. Liquidity tightened so sharply that some banks struggled to pay staff salaries. At certain branches, depositors faced daily withdrawal limits of just Tk 5,000 to Tk 10,000.
Approval to create Sammilito Islami Bank PLC to take over the failed lenders was therefore a last-resort move to protect depositors and avoid outright closures.
Ownership structures showed why the collapse was not simply a technical failure. Exim Bank belonged to Nazrul Islam Mazumder, former chairman of the Bangladesh Association of Banks. The other four were controlled by Mohammed Saiful Alam of the Chattogram-based S Alam Group.
Both were politically close to ousted prime minister Sheikh Hasina, and regulators say they held shares directly and through nominees. When risks could no longer be hidden, weak supervision and concentrated ownership turned private losses into a public burden.
For depositors, the impact was immediate. A cash shortage that had built up over years became severe early in 2025. People seeking money for medical needs, pensions or small businesses often left branches empty-handed.
Assurances from Bangladesh Bank that deposits were safe eased panic but did not bring confidence back. Weaker deposit growth tightened liquidity further. By December, queues outside branches across Dhaka signalled ongoing distress, especially among small savers and elderly pensioners.
Regulators responded firmly. Bangladesh Bank (BB) repeatedly said no bank would be shut and depositors would not lose their money, while admitting that rebuilding would take time.
Bangladesh Bank introduced a guarantee facility to support liquidity and announced a plan to pay up to Tk 200,000 per depositor from the Deposit Insurance Fund. By year-end, however, those payments had not begun, underscoring the gap between commitments and delivery.
However, the central bank announced on Tuesday (30 December) that customers of these five banks will be able to withdraw up to Tk 2 lakh from the next working day, meaning depositors will gain access to their funds from the very first day of the new year.
Greater transparency made the numbers look worse but showed the true position. Under the Bank Resolution Ordinance, Bangladesh Bank ordered the shares of the five Islamic banks to be written down to zero after their real asset values turned negative. This wiped out paid-up capital and erased all shareholders, including S Alam and the Nasa Group.
The move acknowledged that losses were already embedded, but it did not settle questions of responsibility. Although the Anti-Corruption Commission filed several cases and began steps to seize and repatriate overseas assets, no decisive punishment followed during the year.
Late in 2025, pressure for enforcement increased. The Financial Institutions Division formally told Bangladesh Bank to identify those responsible for pushing the five banks into crisis and to take legal action against owners, board members, officials and default borrowers.
It also called for recovery of non-performing loans, investments and assets—an admission that stability without enforcement risks repeating the same failures.
At the same time, institutional changes moved ahead. Sammilito Islami Bank opened its head office at Sena Kalyan Bhaban in Motijheel. Its board is made up of current and former government officials, with plans to appoint independent directors.
After the repayment scheme began on Tuesday, the five banks formally started operating under the Sammilito Islami Bank name and began replacing their signboards nationwide.
The process to appoint independent directors, a managing director and a company secretary for the new bank is under way.
Whether these changes amount to reform or simply delay a reckoning remains unclear. Mergers, guarantees and capital injections have stabilised the system, but they have not changed the incentives that allowed politically connected owners to extract value while losses quietly piled up.
As the sector moves into 2026, scrutiny will increase and demands for transparency will grow. The key test now is not whether Bangladesh can prevent bank failures—it already has—but whether it can enforce accountability, recover misappropriated assets and rebuild trust without relying indefinitely on public money.
If that test is not met, 2025 will be remembered not as the year reform began, but as the year problems were finally exposed and the system focused on survival rather than repair.
