In an unprecedented move to halt a cascading liquidity crisis triggered by a profound deficit in depositor confidence, Bangladesh Bank late Sunday (June 14) dissolved the entire board of directors of Islami Bank Bangladesh PLC (IBBPLC), the nation’s largest private commercial bank and top Shariah-based lender.
The central bank has invoked Sections 45 and 47(3) of the Bank Company Act, 1991, stripping the controversial chairman Md Khurshid Alam, and all directors of their duties.
In their place, Mohammad Zahir Hossain, an Executive Director of Bangladesh Bank, has been appointed as interim administrator, assuming all plenary powers of the board.
The regulatory intervention follows weeks of mass depositor protests, an average daily cash bleed of Tk1,200 crore, and disruptions across ATM, online banking, and RTGS networks.
While the central bank injected a special liquidity lifeline of Tk2,500 crore into the institution early Sunday, market realities quickly demonstrated that the bank's primary ailment was not a lack of cash, but a collapse of public trust.
The roots of the current panic stretch back to 2017, when the controversial conglomerate S Alam Group seized control of the bank.
Subsequent central bank audits revealed massive insider lending irregularities, with S Alam Group allegedly siphoning off over Tk85,000 crore through direct and disguised loans—large portions of which are currently under investigation for illicit capital flight.
Although the government recently froze S Alam’s shares, the legacy of compromised corporate governance left the institution highly vulnerable to leadership disputes.
The tipping point arrived with the recent, deeply contested appointment of Khurshid Alam as chairman.
The move sparked fierce opposition from both within the bank and from its massive customer base.
Organized under the banner of the "Islami Bank Conscious Depositors' Forum," depositors staged sustained demonstrations outside the bank’s Dilkusha headquarters, issuing a seven-point demand that eventually resonated in the National Parliament.
"Even a Tk50,000 crore bailout cannot revive Islami Bank if public trust is missing," noted a former central bank governor, reflecting a sentiment echoed across social media and customer forums.
Industry analysts emphasize that by dismantling the entire board rather than simply removing the chairman, Bangladesh Bank has tacitly acknowledged that the crisis is structural and rooted in a profound failure of leadership.
New administrator reassures depositors
Stepping into the eye of the storm, newly appointed Administrator Mohammad Zahir Hossain used his first day in office on Monday to issue a strong message of stability directly to the public, aiming to halt the aggressive run on the bank.
"Customers will no longer have to look back," Hossain told reporters, guaranteeing that all banking services—including routine cash deposits and withdrawals—would proceed without further disruption.
He emphasized that the financial safety of all depositors remains the regulator's utmost priority, pledging absolute transparency, strict accountability, and deep structural reforms to root out any systemic irregularities or corruption.
Banking experts view this administrative takeover as a necessary but strictly temporary intervention.
While central bank notices state Hossain will serve "until further instructions," historical precedents from November last year—when five Shariah-based banks (including First Security Islami Bank and Social Islami Bank) were placed under administrators before being restructured—indicate that this is a transitional phase.
However, unlike those smaller institutions, analysts dismiss the likelihood of merging Islami Bank with other entities due to its massive scale and systemic importance to the national economy.
Stakeholders demand swift return to professional governance
The limits of an administrator-led model were sharply highlighted on Monday during a press conference held at Islami Bank Tower by the Conscious Depositors' Forum.
Led by its convener Prof Nurnabi Manik, the forum argued that centralizing all corporate power within a single regulatory bureaucrat could paralyze strategic decision-making and stifle business expansion.
While welcoming the removal of the controversial chairman and the injection of emergency liquidity, the forum announced plans to submit a formal memorandum to the governor of Bangladesh Bank on June 16, demanding the immediate formation of a full-fledged, professional board.
Islami Bank’s acting managing director Md Altaf Hussain emphasized that the lender’s operational health is intricately tied to national economic stability.
"Islami Bank is not just a commercial enterprise; it is the financial backbone for millions of rural entrepreneurs, industrial houses, and expatriate families who rely on us to channel their hard-earned remittances," Hussain added.