HC Upholds Merger of Five Islamic Banks

On Monday, the High Court rejected a writ petition challenging the government’s decision to merge five financially distressed private Islamic banks into a single entity.

The bench, comprising Justice Fahmida Quader and Justice Md Ashif Hasan, passed the order following a brief hearing. Barrister Sayed Mahsib Hossain, representing the petitioner, confirmed the information to the media.

Additional Attorney General Mohammad Arshadur Rouf opposed the petition on behalf of Bangladesh Bank.

The writ, filed on 18 November by general investor Shahidul Islam, named the Bangladesh Bank governor, the finance secretary, and other relevant officials as respondents. It sought directives to protect general shareholders and ensure proportionate share allocation in the proposed Sammilito Islami Bank.

The merger involves First Security Islami Bank, Union Bank, Global Islami Bank, Social Islami Bank, and EXIM Bank. The state argued that the merger was executed under the Bank Resolution Ordinance 2025, which does not provide compensation for shareholders, thus giving the petition no legal merit.

The writ also claimed that the unified bank was being formed without safeguarding shareholder rights and without issuing shares to existing investors. It further alleged that the central bank proceeded with the merger despite longstanding sectoral weaknesses, politically influenced lending, and record-level non-performing loans.

Barrister Hossain noted that reports indicated general shareholders of the merged banks would not receive new shares, although depositor assets would be protected. He said that under the restructuring, investors must absorb losses, leaving ordinary shareholders with no recourse. He described this as a violation of shareholder interests and constitutional guarantees.

On 1 December, former senior secretary Dr Mohammad Ayub Miah was appointed chairman of Sammilito Islami Bank. Bangladesh Bank had previously granted preliminary approval on 9 November following an application from the Ministry of Finance.

KhaborwalaAJ