Bangladesh Bank Governor Dr Ahsan H Mansur on Sunday announced that the merger process of five Shariah-based private banks will begin within a week.

Speaking at a CPD dialogue, he added that the central bank has sought the necessary allocation from the government to move forward with the plan.

Earlier, in an unprecedented move to stabilise Bangladesh’s Islamic banking sector, Bangladesh Bank announced plans to merge five Shariah-based private banks, following massive loan defaults, governance failures, and systemic mismanagement.

The asset valuation of First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank, and EXIM Bank has already been completed. Their default loan rates range from 48% to as high as 96%. Plans are in place to merge these banks and operate them under government management.

Beyond these five, similar decisions may be taken for at least 20 other banks, including some state-owned institutions.

The governor also referred to a specific private Islamic bank, revealing that efforts are underway to sell 82% of its shares — currently owned by S Alam Group — to domestic or foreign investors. If the sale is successful, the proceeds will be used to address the bank’s financial shortfall.

At present, the government has no plans to shut down weak banks. Instead, Ahsan H Mansur assured that maximum support would be given to keep them operational.

According to Asset Quality Review (AQR) reports by two international audit firms, the five banks collectively operate 779 branches, 698 sub-branches, 500 agent outlets and 1,000 ATMs.

They hold deposits totalling Tk1.45 lakh crore but have extended loans amounting to Tk2.15 lakh crore — much of it financed through borrowing from BB and other banks.

Alarmingly, defaulted loans total around Tk1.47 lakh crore — 77% of total lending — with a provisioning shortfall of Tk74,501 crore.