Bid to reclaim defunct SIBL rings alarm bells

The reported attempt by five sponsor shareholders and former directors of the now defunct Social Islami Bank PLC (SIBL) to revive and regain control of the erstwhile Shariah-based lender is deeply intriguing. SIBL has already been diluted and merged with four other troubled institutions into a single state-owned entity under the Bank Resolution Ordinance, 2025 during the interim government’s tenure. All five banks were on the brink of collapse following their asset stripping by the controversial S Alam Group, which has been implicated in multiple financial crime cases, including large-scale money laundering and loan defaulting.

The reported application, submitted to the Bangladesh Bank on Monday, cites Section 18(ka) of the Bank Resolution Act, 2026, which allows former owners to reclaim merged banks. Notably, this provision was inserted at the 11th hour as an amendment to the 2025 ordinance and has since drawn widespread criticism. Critics argue that it could pave the way for the rehabilitation of those who systematically exploited these banks through scams and reckless lending.

Under the amended provision, former owners can regain control by paying 7.5 percent upfront of the funds injected by the government or BB, with the remaining 92.5 percent repayable within two years at 10 percent simple interest. This raises an obvious question: what motivates these former shareholders to seek the return of a bank that no longer exists as an independent entity? Fulfilling such a request would effectively require dismantling Sammilito Islamic Bank PLC—the newly formed institution created through the merger—which began operations on December 2, 2025, backed by Tk 35,000 crore in fresh government capital.

This move also prompts broader concerns. Have the applicants considered the implications for the other four banks in the merger? Or is this merely a test case, perhaps a precursor to similar claims from stakeholders of the remaining institutions? The four banks—First Security Islami Bank, Union Bank, Global Islami Bank, and EXIM Bank—were all part of the same troubled ecosystem. Collectively, the five banks amassed a staggering Tk 1.47 lakh crore in bad loans before the merger. According to a former BB governor, the net worth per share of these institutions ranged from Tk 350 to Tk 420 in the negative. An even more troubling question is: does the controversial amendment signal an eventual pathway for the proxies of S Alam Group to regain influence, if not direct control? It is well-documented that several of these banks were taken over through opaque arrangements and proxy ownership structures linked to the group.

The public has already paid a heavy price for allowing these banks to be captured and misused by politically connected interests during the Awami League era. Depositors endured severe hardship, often unable to access their own funds and still facing withdrawal restrictions. At the same time, recapitalising these institutions has placed a significant burden on the public exchequer. Given this context, any attempt to reverse the resolution process or restore control to former stakeholders must be firmly rejected. The government’s priority should be to stabilise and strengthen the newly formed entity, ensure sound governance, and eventually list it on the stock market to recover public funds and restore confidence in the banking sector.