Depositors Face Two-Year Profit “Haircut” in Merger

In a move that aligns with stringent international bank resolution protocols, Bangladesh Bank has mandated a significant financial “haircut” for depositors of five struggling Sharia-based lenders. Under this new directive, customers will forfeit all accrued profits for the years 2024 and 2025. This measure is a critical component of the forced merger of these institutions into a single entity, to be known as the United Islamic Bank.

The Mechanics of the “Haircut”

On Wednesday, the central bank formally instructed the administrators of the five banks to recalculate all deposit balances. According to the directive, any profit or interest credited to accounts between 1 January 2024 and 28 December 2025 must be nullified. This effectively reduces the final balance of millions of accounts, as the “haircut”—a technical term for the forced reduction of asset values—is applied to stabilise the banks’ precarious financial positions.

The decision stems from the massive losses incurred by these lenders over the last two fiscal years. Officials noted that while deposits typically carried profit rates between 7% and 9%, the banks’ inability to generate genuine earnings rendered these payouts unsustainable.

Financial Profile of the Merging Entities

The scale of the crisis within these five banks is immense. Collectively, they hold the savings of approximately 7.5 million depositors, yet their liabilities far outweigh their performing assets.

Political Fallout and Shareholder Losses

The five banks involved—First Security Islami, Global Islami, Union, Exim, and Social Islami Bank—were previously under the control of figures closely tied to the former administration. Exim Bank was chaired by Nazrul Islam Mazumder, while the remaining four were dominated by the S. Alam Group, led by the controversial tycoon Saiful Alam.

Prior to this depositors’ haircut, the central bank had already declared the shares of these five banks to be zero value, effectively wiping out the equity of all sponsors and investors. Authorities allege that a vast majority of the 1.93 trillion BDT in loans were siphoned off through various irregular schemes by these influential owners.

Looking Ahead

The central bank’s letter emphasised that this “Resolution Scheme” is essential for the survival of the banking sector. By recalibrating deposit balances based on the position as of 28 December 2025, the regulator hopes to launch the United Islamic Bank on a more solvent footing. However, for 7.5 million Bangladeshis, the move represents a painful loss of savings and a stark reminder of the costs of financial mismanagement.