Tk37,332cr investment in peril

Despite the government’s finalisation of the merger of five weak banks into a single consolidated entity named ‘Sammilito Islami Bank’ and the issuance of clear instructions for individual depositors, uncertainty looms large over a staggering amount of institutional deposits, leaving corporate investors and state-owned companies in limbo. 

According to Bangladesh Bank, around Tk37,332 crore in fixed deposits belonging to various institutions and other banks is currently stuck in the five financially weak banks. 

A significant portion of these funds belongs to corporate entities, financial institutions and state-owned companies, which the banks concerned are unable to repay on time, exacerbating liquidity and confidence concerns in the banking sector. 

The largest volume of institutional fixed deposits is held by First Security Islami Bank PLC (FSIBL), amounting to Tk10,185 crore. This is the highest among the five banks, raising serious questions about FSIBL’s repayment capacity.

Union Bank PLC follows with Tk8,631 crore in locked fixed deposits, while EXIM Bank PLC has Tk8,157 crore in blocked funds. Social Islami Bank PLC holds Tk5,791 crore, and Global Islami Bank PLC has Tk4,568 crore in fixed deposits that remain inaccessible.

Under such circumstances, a large number of institutions - including state-owned companies and corporates - have been unable to withdraw their fixed deposits from the five troubled banks, triggering financial stress and operational challenges. 

The situation has also raised fresh concerns among the large investors about liquidity risks.

Auditors of several affected entities have already warned that prolonged delays in recovering these deposits could create serious liquidity problems in the future.

Companies struggle over stuck deposits

According to the financial report of Investment Corporation of Bangladesh (ICB), the entity’s irregular FDRs in 10 non-bank financial institutions and two weak banks amounted to Tk920 crore, placed at different times over the past several years. Despite the maturity of these FDRs, the corporation has yet to recover either the principal or the interest.

ICB Chairman Professor Abu Ahmed told the Daily Sun that the decision to merge certain financial institutions and banks should have been taken much earlier, as many of them were bound to become fragile over time. 

“Most of the company’s funds are currently tied up in non-bank financial institutions, and some fixed deposits are also placed in two or three weak banks. At present, it is not even possible to withdraw those funds, creating liquidity challenges. Although the government has suggested issuing shares in exchange for the FDRs, the exact process has not yet been clarified,” he said.

He added that while cash can be invested flexibly, receiving shares in exchange for cash deposits would still leave institutions facing liquidity shortages.

Meanwhile, the latest financial statements of state-owned Padma Oil Company Limited (POCL) indicate that it has also faced liquidity pressure due to FDRs placed in the five banks.

The auditor’s report for the financial year ended June 30, 2025 highlights POCL’s significant exposure to several banks facing severe liquidity stress.

According to the audited statements, POCL invested nearly Tk193 crore in FDRs with weak banks, including Tk36 crore with First Security Islami Bank, Tk56 crore with Union Bank, Tk79 crore with Global Islami Bank and Tk16 crore with Social Islami Bank.

The auditors noted that POCL realised interest income of Tk17 crore, including advance income tax and excise duty, out of total interest earnings of Tk22 crore from these FDRs.

Company Secretary Ali Absar said POCL had formally approached the banks before the merger decision seeking encashment of the FDRs, but none responded positively, citing acute liquidity constraints. “This lack of response further reinforced concerns over the credit quality of these investments,” he said.

“No fresh applications were made after the government’s final decision to merge the banks. While we have been informed about the arrangements for individual depositors, there has been no clear communication regarding institutional depositors,” he added.

The financial statements of Titas Gas Transmission and Distribution Company Limited disclose receivables of Tk111.29 crore against FDRs, including long-matured investments with First Security Islami Bank, Global Islami Bank and other weak banks. The auditor has expressed uncertainty regarding the recoverability of these investments.

When contacted, Md Rashidul Alam, general manager (finance) of Titas Gas, referred the matter to Mohammad Mohiuddin Mollah, general manager (accounts). Speaking to the Daily Sun, Mollah said that investments had been made in Padma Bank and Global Islami Bank as fixed deposits following the management’s decision.

“After the deposits matured, several letters were sent to the banks for encashment, but they expressed their inability to repay the funds. Even after maturity during FY2024-25, the banks could not make payments due to the ongoing merger process following political changes and Bangladesh Bank decisions,” he said, adding that discussions with the central bank were continuing.

He noted that further updates would be available once normal banking operations of the merged bank resume.

Government’s plan to address the crisis 

Against such a backdrop, the government plans to compensate institutional depositors not in cash but through preference shares of the newly formed consolidated entity, Sammilito Islami Bank. 

These shares will have to be held for at least five years and are expected to yield returns equivalent to prevailing bank profit rates. Bangladesh Bank is likely to issue detailed guidelines on the mechanism shortly.

Bangladesh Bank spokesperson Arif Hossain Khan told The Daily Sun that administrators appointed by the central bank are currently managing the operations of the five banks while advancing the merger process. 

“The refund of individual deposits of up to Tk200,000 is underway. The government has already injected Tk20,000 crore in capital. A final decision has yet to be taken regarding the remaining Tk15,000 crore. In this case, institutional deposits may be converted into capital, or the amount may be provided as capital from the Deposit Insurance Fund,” he added.

Until the guidelines are made public, investors remain anxious about how and when they will regain access to their funds, as prolonged uncertainty continues to weigh on liquidity, confidence and financial planning across the corporate and institutional sectors.  

The reporter can be reached at: [email protected]