Bangladesh Bank Expands Withdrawal Access for Customers of Merged Islamic Banks

Central bank allows depositors to withdraw up to Tk 1 million for medical and other urgent personal needs under revised repayment scheme

DHAKA, Bangladesh, July 29 —

Bangladesh Bank has broadened the scope of its depositor support program for customers of five merged Islamic banks, allowing eligible account holders to withdraw up to Tk 1 million not only for medical treatment but also for other urgent personal and family-related needs.

The decision was approved at a meeting of the central bank's Board of Directors on Wednesday, chaired by Bangladesh Bank Governor Mostakur Rahman, according to officials familiar with the proceedings.

The revised policy applies to customers of the five institutions that were brought together under a government-led restructuring initiative: First Security Islami Bank, Social Islami Bank, Union Bank, Global Islami Bank, and EXIM Bank.

Under the previous framework, depositors could access a limited portion of their funds primarily for their own medical expenses. The updated scheme significantly expands that eligibility, enabling withdrawals for the treatment of immediate family members, including parents, spouses, children and siblings, as well as for other verified emergency requirements.

Officials involved in the policy review said the change was introduced after authorities received feedback that many depositors faced urgent financial obligations that extended beyond healthcare expenses.

“Families often require immediate access to funds for critical personal situations, including medical emergencies and other pressing household needs,” a senior central bank official said. “The revised arrangement is intended to provide greater flexibility while continuing the phased repayment process.”

The five banks became the focus of an extensive financial restructuring effort after years of mounting liquidity pressures and governance concerns. According to banking sector assessments, large volumes of loans were extended during previous years, often under weak risk-management practices and with insufficient collateral coverage, contributing to severe financial distress within the institutions.

As the situation worsened, many depositors experienced prolonged difficulties in accessing their savings, prompting authorities to intervene through a consolidation program. Last year, the interim government merged the five Shariah-based lenders into a single institution known as Combined Islamic Bank, aiming to stabilize operations and restore depositor confidence.

The newly formed bank has been assigned a paid-up capital base of approximately Tk 35,000 crore, of which the government has contributed Tk 20,000 crore. The remaining Tk 15,000 crore is expected to be covered through a mechanism that grants shares to depositors.

In parallel, the country's deposit insurance fund has allocated Tk 12,000 crore to compensate eligible depositors. Under that program, account holders have been receiving payments of up to Tk 200,000, while a separate repayment framework has been established for the gradual return of remaining deposits.

Central bank data show that approximately 822,000 depositors have so far received a combined Tk 3,887 crore through the compensation process. Of that amount, around Tk 1,600 crore has been paid to roughly 350,000 customers of First Security Islami Bank.

Financial indicators released by Bangladesh Bank highlight the scale of the challenge facing the merged institutions. As of the end of December, the five banks held a combined loan portfolio of approximately Tk 195,000 crore. Against those loans, collateral coverage stood at only Tk 47,900 crore, representing about 24.56% of total outstanding credit.

The banks are also burdened by a high level of non-performing assets. According to central bank figures, classified or defaulted loans have reached approximately Tk 170,500 crore, accounting for nearly 87.43% of the combined loan portfolio.

Economists and banking analysts say the revised withdrawal policy could provide short-term relief for affected depositors while broader restructuring efforts continue. However, they note that restoring long-term stability will depend on successful recovery of distressed assets, improved governance standards and sustained capital support for the restructured banking group.