Once the crown jewel of the private banking sector, the Islami Bank of Bangladesh is now navigating choppy waters, grappling with mounting financial losses, eroding investor confidence and internal dysfunction.
Industry insiders point to the inexperience and inefficacy of the current board and management as the principal cause behind the bank’s rapid decline.
Until just over a year ago, the bank was a beacon of performance, consistently posting enviable figures across every major banking index.
Now, senior staff warn of a looming crisis that could threaten the bank’s ability to pay staff salaries and depositors’ profits in the coming months.
Should the profitability outlook remain grim, a run on deposits could further deepen the crisis.
The bank’s operating profit for 2024 stood at an impressive Tk3,400 crore, even amidst political volatility, rumours and market uncertainty.
However, by the end of March 2025, losses had already ballooned to nearly Tk1,000 crore — a dramatic reversal that raises urgent questions about the bank’s future viability.
An executive, speaking on condition of anonymity, warned that unless urgent measures are taken, the bank may be unable to meet payroll after June. “Without profits, we’ll lose depositor trust.
Withdrawals will surge, and the bank’s condition will deteriorate further,” the official stated.
Among the most telling indicators of the bank’s ailing health is its classified investments — essentially defaulted loans.
Prior to the change in board leadership on 5 August, this figure stood at a modest 4%.
By the close of the March quarter, it had soared to 32%, or Tk45,000 crore. Of this, Tk14,000 crore should be provisioned for, but the bank has only Tk700 crore on hand, making meaningful recovery unlikely.
Once a powerhouse in remittance and foreign trade, the bank has witnessed a dramatic collapse in inflows since the new leadership took charge.
Remittance, previously making up 35% of the national total, has now fallen to 16.43%, according to Bangladesh Bank data.
The knock-on effect has been a contraction in import business, while competitive exporters are increasingly turning to other banks for trade finance, causing export revenues to nosedive.
When asked how the bank might arrest its fall, a senior official suggested that regulatory flexibility and a revival of revolving credit facilities could stabilise the situation.
“If the central bank facilitates dialogue with businesses and caps LC limits under a controlled framework, the pressure on classified loans could ease,” the official noted.
Yet the spectre of corruption looms large. Widespread probes into lending irregularities have paralysed mid-level management.
Officers and department heads alike are reportedly reluctant to take responsibility, fearing repercussions.
“There’s a leadership vacuum,” the official said bluntly. “No one wants to be accountable. Without urgent reform, this bank’s downward spiral will only accelerate.”
