Islami Bank Bangladesh PLC—the country’s largest private Shariah-compliant lender—is staging a gradual recovery following weeks of an unprecedented confidence crisis that threatened to fracture the wider financial system.
At the peak of the panic, major commercial outlets refused to honor Islami Bank pay-orders, transactions via the Real-Time Gross Settlement (RTGS) network came to a standstill, and mass customer withdrawals forced branches to cap cash cash-outs below Tk1 lakh.
However, a coordinated rescue plan combining immediate cash injections with key regulatory policy updates has successfully stabilized operations and quieted market speculation.
The operational crisis began in earnest on May 24, when the central bank appointed Khurshid Alam—a figure widely linked to the controversial S. Alam Group—as chairman of Islami Bank.
The appointment triggered immediate street protests by the Islami Bank Conscious Depositors' Forum and sparked widespread anxiety across social media networks.
Fearing a complete collapse of their savings, depositors rushed to withdraw funds en masse, draining the bank’s cash reserves.
As Islami Bank holds a massive retail customer base and a vast branch network, its liquidity freeze immediately threatened the interbank clearing system, forcing the state to step in.
To prevent a systemic run on the banking sector, Bangladesh Bank launched an aggressive emergency rescue plan.
Regulatory officials removed the controversial chairman, dissolved the standing board of directors, and appointed Mohammad Zahir Hossain, executive director of Bangladesh Bank, to run the bank's daily operations.
Unveiling the monetary policy statement on Tuesday, Bangladesh Bank Governor Mostaqur Rahman confirmed that the central bank has provided Tk13,000 crore in direct liquidity support to Islami Bank alone.
Governor Rahman noted that while the previous administration used Tk17,250 crore to support weak financial institutions, the current oversight bodies have had to inject Tk51,000 crore across the broader banking sector to preserve systemic integrity.
Slamming door on corporate defaulters
Alongside the liquidity injection, the long-term outlook for Islami Bank was significantly improved by a crucial legislative amendment in the Jatiya Sangsad.
Finance Minister Amir Khasru Mahmud Chowdhury announced the permanent deletion of Section 18(a) from the Bank Resolution Act 2026.
The removal of Section 18(a) effectively blocks former majority corporate shareholders, such as the S Alam Group, from ever using legal loopholes to regain ownership or control of restructured financial institutions.
Bank officials report that the dual strategy of capital support and structural reform has effectively restored consumer trust. Panic withdrawals have stopped, new retail deposits are increasing, and standard cash-out limits have safely expanded past Tk2 lakh per account.
Independent macroeconomists point out that while this emergency liquidity package successfully averted an immediate collapse, long-term stability depends on deeper structural reforms.
Moving forward, the central bank must focus on recovering non-performing loans (NPLs), chasing down laundered offshore assets, and keeping the newly appointed professional board free from political interference.