Dhaka:Islami Bank Bangladesh PLC, the country's largest private bank, is seeking a substantial equity investment of Tk 6,000 crore from the government to address its severe capital crisis, potentially leading to significant state ownership.
According to United News of Bangladesh, the proposal would result in the government's stake in the bank increasing to 78.8 percent, effectively bringing the institution under state control. This move aims to resolve the bank's capital deficit, strengthen its financial foundation, and prevent previous owners from regaining influence. Bangladesh Bank has forwarded the proposal to the Financial Institutions Division of the Ministry of Finance for approval.
The bank has submitted a 'Capital Restoration Plan 2027-2033' to Bangladesh Bank, proposing the issuance of 600 crore new ordinary shares, each valued at Tk 10, through private placement. This would raise the bank's paid-up capital from Tk 1,609.99 crore to Tk 7,609.99 crore. The initiative also includes increasing the bank's authorized capital from Tk 2,000 crore to Tk 10,000 crore, with potential foreign strategic investment under consideration.
Islami Bank reported a net post-tax loss of Tk 3,303 crore during the first nine months of the current year, a stark contrast to a profit of approximately Tk 79 crore in the same period last year. The bank's financial crisis deepened after the Chattogram-based S Alam Group took control in 2017, with alleged siphoning of large sums. Following a political change on August 5, 2024, S Alam Group lost control, and an administrator appointed by Bangladesh Bank took over management.
The proposal has drawn mixed reactions. Former Bangladesh Bank Governor Ahsan H. Mansur opposes state ownership, citing potential operational inefficiencies and governance risks. He suggests seeking foreign investors instead. Conversely, Dr. Fahmida Khatun of the Centre for Policy Dialogue emphasizes the need for careful evaluation, stressing the importance of assessing the bank's true capital situation and asset quality before any investment.