The government of Bangladesh is considering a Tk 60-billion equity injection into Islami Bank Bangladesh to gain public control of the private commercial lender, according to sources. The bank has been grappling with massive financial losses, alleged fund embezzlement, and a severe erosion of its capital base.
On November 9, the central bank wrote to the Financial Institutions Division seeking the government’s position on a capital boost for Islami Bank Bangladesh PLC. The bank’s April 4 proposal seeks to increase its paid-up capital from Tk 16.10 billion to Tk 76.10 billion through a new share issuance.
Proposed Capital Enhancement
The plan calls for issuing 6.0 billion ordinary shares, each valued at Tk 10, to be sold privately to the government or approved state-backed investors. These shares, worth Tk 6.0 billion, would represent roughly 79% of the bank’s expanded capital base, potentially allowing the government to gain majority control.
The central bank has clarified that the final decision on whether the government participates lies entirely with the authorities. Islami Bank Bangladesh has also included a Capital Restoration Plan for 2027–2033 as part of its submission, according to Bangladesh Bank officials.
Financial Condition
Islami Bank Bangladesh incurred a consolidated loss of Tk 32.86 billion during the January-September period of 2026, compared to a profit of approximately Tk 1.0 billion in the same period a year earlier. The bank’s financial disclosures point to lower investment income, rising deposit-related expenses, and a shrinking deposit base.
Allegations of large-scale fund diversions during the S Alam Group’s period of influence have intensified scrutiny of past lending decisions and the beneficiaries of major investments. At the end of the period, the bank’s capital-to-risk-weighted-assets ratio stood at 6.42 per cent on a standalone basis and 6.60 per cent on a consolidated basis, far below the regulatory requirement of 12.50 per cent.
Proposed Investment
If approved, the government’s potential investment could improve the bank’s financial standing and secure a dominant ownership position—though the exact terms, valuation, and funding details remain undisclosed.
The proposal also raises questions about using taxpayers’ money to recapitalise a bank whose financial difficulties are linked to alleged large-scale irregularities and unrecovered investments, a retired high official said.
The bank’s board has voted to raise its authorized capital from Tk 20 billion to Tk 100 billion, pending approval from regulators and shareholders at an extraordinary meeting. While this allows for more share issuance, it does not guarantee new capital or resolve the existing shortfall.
The government and the central bank must also ensure transparent valuation, shareholder protection, recovery of diverted funds and accountability for those involved in financial irregularities.
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