Bangladesh Bank's Tk 68,245 Crore Bailout Fails to Fix Struggling Sharia Banks
Bangladesh Bank has pumped Tk 68,245 crore into 12 struggling banks since late 2022 under emergency liquidity measures. The funds were mostly directed to five Sharia-compliant lenders now slated for a forced merger. Critics warn that repeated cash injections without deeper reforms risk worsening the financial crisis.
The largest recipients included First Security Islami Bank (Tk 15,810 crore) and EXIM Bank (Tk 12,010 crore). The central bank began extending short-term loans in early 2023, using promissory notes as collateral due to a lack of eligible assets. These funds were primarily used to plug gaps in the cash reserve ratio and current accounts that banks must maintain with the regulator. Economists cautioned that such liquidity support, while easing immediate pressure, could amplify long-term risks if structural issues remained unaddressed.
By March 2025, the five Sharia-based banks saw their non-performing loans (NPLs) surge to 24.13% of total lending. Provisioning shortfalls ballooned sixfold to Tk 170,655 crore, while capital deficits reached Tk 1.55 lakh crore by June 2025. Islami Bank Bangladesh faced a Tk 18,504 crore shortfall, and Union Bank's deficit hit Tk 21,387 crore. Independent audits by KPMG and Ernst & Young concluded that merging these lenders into a single state-owned entity would create a 'zombie bank' with 75-80% of assets non-performing, requiring perpetual subsidies.
The initial Tk 68,245 crore injection could expand to over Tk 3.75 lakh crore across the financial system through the money multiplier effect. Central banks effectively create new money when lending to commercial banks, a process often called 'printing money'. The emergency funding has temporarily stabilised the banks, but their financial health continues to decline. With NPLs and capital shortfalls growing, the proposed merger faces major obstacles. Auditors and economists agree that without addressing core weaknesses, the crisis could deepen further.
