Islami Bank Bangladesh Faces Corporate Client Confidence Concerns Amid One-Member Board, MD Vacuum

Dhaka, September 23, 2026 — Islami Bank Bangladesh Limited (IBBL) — the country's largest bank by deposits and loans — is facing growing operational difficulties as it continues to operate with a one-member board and without a regular managing director for over three months, raising concerns among corporate customers. The governance vacuum is now beginning to affect the bank's long-standing corporate clients, including hundreds of garment factories that rely on the bank for salary payments, letters of credit and working capital.

📋 Speaking to The Business Standard, several officials in the bank's corporate division said loan proposals are moving through the regular process but getting stuck at the final approval stage, where decisions often require higher-level authorisation. The delays are affecting loan renewals, increases in credit limits, new loan facilities and large import and export financing arrangements.

📊 The Scale of the Crisis

Islami Bank is the largest private commercial bank in Bangladesh by deposits and loans, with a balance sheet that touches virtually every major industrial sector. The current governance crisis has affected the bank's financial health:

• 💰 Deposits fell to Tk 1.61 lakh crore from Tk 1.85 lakh crore — a decline of approximately Tk 24,000 crore.
• 💰 Non-performing loans (NPLs) reached Tk 98,914 crore — approximately 52 per cent of total loans.
• 💰 The bank posted an operating loss of Tk 1,285 crore in H1 2026.
• 💰 Senior executives' contract renewals are also stuck.

🏦 Operational Impact on Corporate Clients

Hundreds of garment factories and other industrial businesses still use Islami Bank to pay salaries and allowances to their employees. These businesses also require letters of credit (LCs) and working capital to conduct their regular import and export operations. However, some companies are not receiving financing according to their requirements, while others are facing delays in opening letters of credit, according to bank officials.

This has exposed some of the bank's long-standing corporate customers to business risks — a particular concern for the readymade garment (RMG) sector, where delays in LC openings and working capital disbursements can translate directly into production halts and missed export shipment deadlines.

A deputy managing director of the bank, on condition of anonymity, said even long-standing customers are becoming concerned about continuing their business with the bank because of the absence of a full board. He said the lack of a full board is also making it difficult for the bank to focus on new lending to sound corporate clients, while the acting managing director had to remain highly cautious about approving new investments.

👥 Rival Employee And Customer Protests

The operational difficulties come amid renewed protests by employees dismissed from Islami Bank after being recruited in Chattogram's Patiya during the period when the bank was under the control of S Alam Group. A group calling itself the Sacheton Grahok Forum (Conscience Customer Forum) has also held counter-programmes, accusing the dismissed employees of being part of the “S Alam gang” and of conspiring against Islami Bank.

Most members of the organisation are customers of the bank as well as supporters of a political party. The rival programmes escalated into physical clashes and stone-throwing last week. Over 50 people were injured in clashes, according to leaders of both sides.

However, a senior Bangladesh Bank official said street protests would not resolve the issue. The official said the central bank is examining whether there had been any irregularities in the recruitment and dismissal of the employees. The matter is also before the courts, he said.

🏦 MD Post Vacant For Over Three Months

📋 The bank has also been operating without a regular managing director for about three and a half months. Omar Faruk Khan was the bank's managing director before the previous board sent him on leave on 13 April 2026. He was unable to return to the bank after his leave ended and subsequently resigned. No regular managing director has been appointed since then, and the bank's day-to-day operations are being run by an acting managing director.

Under the Bank Company Act and relevant Bangladesh Bank regulations, a managing director's post cannot ordinarily remain vacant for an extended period. When the post becomes vacant, an acting executive may assume responsibility for the managing director's functions. However, the vacancy cannot ordinarily continue for more than three months, after which the Bangladesh Bank may appoint an administrator.

💬 Shahriar Siddiqui, director and assistant spokesperson of the Bangladesh Bank, said there is no provision for keeping the managing director's post vacant for more than three months. “If the post becomes vacant for more than three months, the central bank can appoint an administrator,” he said.

🏛 Bangladesh Bank's Position

The Bangladesh Bank official said while Bangladesh Bank is responsible for handing over the bank to a new board, the central bank is still searching for suitable candidates.

💬 “Islami Bank needs stability in the interest of the country's economy,” he said, adding that a solution would be easier through coordination between the country's two major political parties.

The remark underscores the political sensitivity surrounding Islami Bank's governance — a sensitivity that has long characterised the institution. Islami Bank has historically maintained relationships with both major political coalitions, and any attempt to restructure its board inevitably requires political alignment.

💼 S Alam Group Era Legacy

Islami Bank's current crisis has its roots in the period when it was under the control of S Alam Group, one of Bangladesh's largest conglomerates. The S Alam era saw controversial large-scale recruitment drives — including thousands of new hires made without formal circulars or competitive examinations — which have been the subject of ongoing probes by the Bangladesh Bank and other investigative bodies.

Previous TBS investigations documented:

• 📋 10,000 jobs without circulars — how S Alam-controlled Islami Bank carried out recruitments without exams.
• 📋 CV boxes, no exams, no circulars — a fresh probe exposed the S Alam-era hiring scam.

The dismissed employees from the Patiya recruitment drive are now at the centre of the protests that have rocked the bank's headquarters and branches in recent weeks.

🏢 Why Islami Bank Matters For Bangladesh's Economy

💼 As Bangladesh's largest private bank by deposits and loans, Islami Bank's stability has systemic implications for the country's financial sector. The bank holds approximately:

• 💰 Tk 1.61 lakh crore in deposits — representing a significant share of total banking sector deposits.
• 💰 A major share of trade finance — particularly for RMG sector LCs and working capital.
• 💰 Millions of retail customers — including rural and small business depositors.
• 💰 A large branch network — with over 380 branches across Bangladesh.

For the export economy, the bank's health is particularly important. Many RMG factories depend on Islami Bank for trade finance, and any disruption to LC openings or working capital disbursements has direct implications for the country's US$48 billion RMG export target for FY27.

🏛 Wider Banking Sector Context

The Islami Bank crisis comes at a difficult moment for Bangladesh's broader banking sector. The country's banking sector has been grappling with:

• ⚠ Elevated non-performing loans (NPLs) across the system.
• ⚠ Banking sector recapitalisation needs estimated at several billion dollars.
• ⚠ Governance reforms mandated under the IMF programme.
• ⚠ Tightened nominee director rules announced by Bangladesh Bank.
• ⚠ Multiple administrator appointments for troubled banks, including Social Islami Bank (SIBL) and the merged Islamic banks entity.

For the Bangladesh Bank, finding a sustainable resolution to the Islami Bank governance crisis is now a top priority. The central bank has the legal authority to appoint an administrator if the MD vacancy extends beyond three months — and that threshold has now been crossed. Whether Bangladesh Bank exercises that authority in the coming weeks will be closely watched by corporate clients, depositors and the broader financial markets.

In the meantime, hundreds of RMG factories, importers and corporate clients are caught in the operational uncertainty — hoping that the country's largest private bank can be restored to full governance before the disruption translates into wider economic damage.