Bangladesh Bank has released Tk 5,000 crore to facilitate the repayment of deposits held with Sammilito Islami Bank, as tens of thousands of customers seek access to their money following the consolidation of five Shariah-based banks.
Within six days of applications opening on 1 September, around 75,000 depositors had applied to withdraw their funds. The total amount sought through those applications stands at approximately Tk 3,925 crore, according to information cited in the report.
The central bank released the Tk 5,000 crore on Sunday, 6 September. Under the repayment process, applications are being reviewed and verified before payments are made to eligible depositors. The bank was expected to begin disbursing funds from Monday.
Sammilito Islami Bank was formed through the merger of five banks: EXIM Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank and Union Bank. The consolidation came after concerns over the financial condition of the institutions and allegations of irregularities involving lending and the movement of funds.
During the previous Awami League government, EXIM Bank was under the control of Nazrul Islam Mazumder, a former chairman of the Bangladesh Association of Banks. The other four banks were controlled by S Alam Group chairman Saiful Alam. Allegations of irregularities and the withdrawal of funds through loans had emerged during that period, contributing to financial weaknesses within the banks.
The interim government subsequently moved to merge the five Shariah-based banks into a single institution in an effort to address the difficulties faced by the banks and their depositors.
The paid-up capital of the newly formed bank has been set at Tk 35,000 crore. Of this, Tk 20,000 crore is being provided by the government, while the remaining Tk 15,000 crore is expected to be converted into shares for depositors.
A further Tk 12,000 crore has been allocated from the deposit insurance fund to facilitate repayment of up to Tk 2 lakh to individual depositors. Bangladesh Bank has also announced a scheme under which deposits are to be repaid in phases.
No haircut on principal deposits
On 25 August, the Bangladesh Bank governor announced that no ‘haircut’ would be imposed on deposits held with Sammilito Islami Bank. In practical terms, depositors will not have their principal reduced as part of the repayment arrangement.
Individual depositors have been allowed to withdraw their principal deposits from 1 September, subject to the prescribed application and verification process. Customers are required to apply through the relevant branch or sub-branch, after which their claims are checked before payment is authorised.
The bank has confirmed that it has already received the necessary funds from Bangladesh Bank to make the payments.
Principal can be withdrawn, but not profit
Under Bangladesh Bank’s instructions, individual customers can withdraw the principal held in current and savings accounts, as well as the principal amount of term deposits. However, profit accrued or otherwise payable on those deposits cannot currently be withdrawn.
Once a customer withdraws the principal amount, the deposit will be treated as fully and finally settled. If the customer has any outstanding loan or financial liability with the relevant transferring bank, that liability will be adjusted against the deposit before the remaining funds are paid.
Customers who choose not to withdraw their money immediately and keep their accounts active will remain eligible to receive profit at the applicable rate under their existing contractual arrangements.
There are also specific conditions for term deposits. If a term deposit is encashed before its scheduled maturity, the customer will receive the principal but will not receive profit on that amount. Where a depositor withdraws only part of the funds, the remaining balance may continue to earn profit according to the applicable rules.
Bangladesh Bank Executive Director and spokesman Arif Hossain Khan said preparations had been completed to return depositors’ money. He said the bank would make payments in accordance with the commitment given to customers and urged depositors not to panic.
Central bank urges customers to avoid unnecessary queues
The large number of applications has also raised concerns about crowding at bank branches. Bangladesh Bank has therefore advised customers who do not urgently need their money to avoid visiting branches on the first available day and instead withdraw their funds gradually.
The central bank spokesman said the simultaneous arrival of a very large number of depositors could disrupt normal banking operations and create difficulties in processing payments efficiently.
The release of Tk 5,000 crore is higher than the Tk 3,925 crore currently sought through the applications received during the first six days. The immediate priority is now to complete the verification process and ensure that eligible depositors receive their principal according to the established repayment arrangements.
For depositors, the development marks the beginning of a structured process aimed at restoring access to funds held with the newly consolidated bank. While the principal is available for withdrawal under the current arrangement, profit payments remain subject to the conditions set by Bangladesh Bank.