Years of group-based looting and politically driven lending under the Awami League regime pushed the banking sector to the brink, and conditions worsened sharply in the post-uprising period due to contradictory policy decisions and public statements by Bangladesh Bank high-ups.
Nine banks, including National, EXIM and Social Islami, have been among the hardest hit. Five of them have since been brought under a merger process, culminating in the formation of Sammilito Islami Bank PLC.
The crisis was driven less by fresh losses than by regulatory signals that altered depositor behaviour almost overnight.
Stakeholders say that following the assumption of power by the interim government, a series of central bank actions, including the imposition of limits on cash withdrawals, jolted depositors.
The shock deepened after Governor Ahsan H Mansur publicly announced that no additional cash would be printed to support weak banks.
Although the central bank later injected cash into these banks, it was too late.
For lenders that had survived for years on regulatory liquidity support, the statements effectively functioned as a withdrawal signal. Acute cash shortages followed. Long queues formed. Customers returned day after day, attempting to retrieve their savings.
TIMES spoke to at least a dozen top bankers about the fallout. All agreed, anonymously, that a bank’s core asset is confidence, not money. When a regulator publicly labels a bank weak or exposes its financial condition, customers lose trust and transactions dry up.
A chairman of a troubled bank, speaking on condition of anonymity, said central bank governors rarely speak publicly at length anywhere in the world. In modern banking systems, corrective actions are handled with strict confidentiality to avoid panic.
“In Bangladesh, however, there has been a race to create fear and destroy confidence,” he said, adding that the central bank’s top leadership could not escape responsibility.
A former sponsor-director of a Shariah-based bank, also speaking anonymously, said at least two of the five banks now being merged could have recovered if Bangladesh Bank had worked to rebuild depositor confidence instead of undermining it.
Bangladesh Bank Governor Ahsan H Mansur told TIMES of Bangladesh, “When I took office as governor, we did not have a Bank Resolution Ordinance. We had no legal basis. We had not even developed any strategy.” For these reasons, he said, specific decisions were delayed.
Chronicle of eroding confidence
The first market shock came on 7 August 2024, when Bangladesh Bank imposed limits on cash withdrawals. Although the move was intended to prevent allies of the ousted government from extracting funds, the operational impact was immediate. For depositors, the signal was unmistakable: the system was wobbling.
Confidence weakened further on 20 August, after the governor said the central bank would not print additional cash to support weak banks. He also questioned why customers had kept deposits in such institutions, adding that Bangladesh Bank would not take responsibility.
The erosion deepened on 8 September 2024, when the governor told a press conference that around ten banks were heading towards bankruptcy and could be merged.
Facing consequences, the central bank reversed course.
Within two weeks, the governor announced a special liquidity package for troubled banks.
On 22 September, agreements were signed with five banks — National, First Security, Union, Global Islami and Social Islami — formally branding them “weak”.
The banks were already struggling to meet withdrawal demands. After the label was applied, confidence fell further.
On 23 September, Bangladesh Bank officially disclosed that the combined current account deficit of nine banks had reached Tk18,000 crore. The list — National, EXIM, First Security, Social Islami, Union, Islami, Bangladesh Commerce, Padma and ICB Islamic — was unprecedented in its specificity.
From 1 October to the end of November, about Tk22,500 crore was pumped into weak banks. Including Bangladesh Bank-issued funds, total borrowing rose to Tk52,000 crore. Yet the money did not stay. Depositors withdrew without redepositing. The circular flow broke.
Bangladesh Bank documents show Social Islami Bank received Tk10,138 crore under liquidity and guarantee support, EXIM about Tk8,500 crore, and National Tk7,000 crore.
Yet records show that between 5 August 2024 and October 2025, EXIM alone lost about Tk11,700 crore in deposits; by September, Social Islami had lost about Tk6,800 crore and National about Tk6,000 crore.
A different outcome emerged at Islami Bank Bangladesh, which repaid central bank funds.
Sector insiders cited its large customer base and support from a religion-based political party. The governor also repeatedly spoke publicly in its favour, helping sustain confidence.
Analysts said Bangladesh Bank both fuelled panic through public messaging and then lent at high interest, making banks indebted to the regulator.
“We gave them Tk22,000 crore. They had no capacity to repay. That is why we acquired them,” the governor told TIMES.
Will the merger plan work?
On 9 April 2025, the governor said many of the country’s ten Islamic banks were weak and would be merged.
On 15 June, he said five Shariah-based banks — First Security, Global Islami, Union, Social Islami and EXIM — would be combined into a new state-owned bank, despite proposals from EXIM and Social Islami to recover independently.
Documents show EXIM asked only for two years and no financial support, while Social Islami sought Tk6,000 crore in interest-free loans over ten years. Both submitted plans. Bangladesh Bank moved directly to merger.
Questions followed over why EXIM and Social Islami — whose non-performing loan ratios stood at 48 per cent and 63 per cent — were included, while some banks with ratios above 80 per cent were not.
Bangladesh Bank spokesperson Arief Hossain Khan told TIMES this was because other distressed banks were not Shariah-based.
There were also disputes over whether the process constituted a merger at all. Assistant spokesperson Mohammad Shahriar Siddiqi said it was “a process between merger and liquidation”.
More than a dozen Bangladesh Bank officials privately said they disagreed with the approach but did not want to challenge the governor.
On 5 November, administrators were appointed to these banks. The governor said shares with a face value of Tk10 now carried net asset values of negative Tk350 to Tk420, leaving shareholders with nothing.
The sharpest question centred on EXIM Bank. Bangladesh Bank’s own ratings had listed EXIM among the top ten “sustainable banks” in 2020, 2021 and 2023. When the governor later said its book value had turned negative within a year, shareholders and depositors questioned the credibility of regulatory assurance.
“We invested after seeing this Bangladesh Bank rating. Today we are destitute. Who will take responsibility — us, or Bangladesh Bank?” said an investor, Adil Rahman.
Another investor, Abdul Halim, said the banks’ condition resulted from looting enabled by regulatory failure, while ordinary investors were misled by dressed-up reports.
Former Bangladesh Institute of Bank Management director general Toufic Ahmad Choudhury warned the five banks could become a larger problem without real synergy.
Brac Bank vice chairperson Faruq Mayeenuddin Ahmed said five holes risk becoming one large hole unless sustainable solutions are found.
