Uncertainty surrounding the merger scheme of five Islamic banks has left a large number of current and savings account holders unable to withdraw their money, triggering anxiety among depositors and crowding at bank branches across the country. Despite assurances from Bangladesh Bank that general depositors’ interests will be protected, ambiguities in the implementation of the scheme have created confusion on the ground, bankers and customers say.
Over the past three working days alone, customers have withdrawn nearly Tk 200 crore from the five banks undergoing the merger process, according to industry insiders. While no untoward incidents have been reported so far, bankers admit that the lack of clarity is testing public confidence at a sensitive moment for the country’s fragile banking sector.
Central Bank Scheme, Ground-Level Confusion: On Tuesday, Bangladesh Bank announced a detailed scheme outlining the timeline for deposit repayment and measures to safeguard general depositors of the five Islamic banks slated for merger. Under the scheme, deposits of up to Tk 200,000 per customer are guaranteed full protection and can be withdrawn at any time under the Deposit Protection Act. For depositors with balances exceeding Tk 200,000, withdrawals will be allowed in instalments, with current and savings account funds to be released in phases over varying tenures-potentially taking up to 24 months to fully recover the deposited amount.
The scheme also includes provisions for term deposit holders, such as maturity extensions and market-based profit rates, aimed at easing pressure on bank liquidity while ensuring eventual repayment.
However, depositors and bank officials told Daily Industry that ambiguities in the scheme have meant that even customers with balances within the Tk 200,000 guaranteed limit are facing difficulties in withdrawing their money.
Depositors Unable to Access Funds: Customers of the five banks report that while the principal amount of deposits up to Tk 200,000 is being paid out, accrued interest is not being released. In many cases, interest earned on savings accounts and fixed deposits has been credited to savings accounts, but withdrawals of that interest are not permitted. “As a result, even customers who should be fully protected under the scheme are unable to access their full balance,” said a senior officer of one of the merged banks, speaking on condition of anonymity. “This has caused frustration and fear among depositors, particularly small savers who rely on this money for daily expenses.”
Bank officials also noted that interest from savings certificates and bonds, which is usually credited to savings accounts, cannot currently be withdrawn. Similarly, remittance inflows credited to savings accounts are reportedly blocked, leaving expatriate families unable to access urgently needed funds.
Joint accounts-such as those held by spouses or family members-have also been affected. In many cases, withdrawals from joint accounts are not being allowed at all, further widening the pool of anxious depositors.
Crowds at Branches, Limited Answers: Branches of the five banks have seen a steady influx of customers seeking clarification. However, frontline bankers say they are unable to provide clear answers due to the lack of specific operational guidelines. “We are facing depositors every day who want to know when they can withdraw their savings or interest,” said a branch manager of one of the affected banks. “But we ourselves have not received detailed instructions on how to deal with interest amounts, remittances, or joint accounts. This puts us in a very difficult position.” According to bankers, the faster these ambiguities are resolved, the higher the chances of successfully implementing the merger without damaging public trust.
Administrators Cite Regulatory Constraints: Two administrators overseeing the merged banks told Daily Industry that their hands are tied by regulatory instructions.
“Under the current directives, we are only able to pay depositors using funds from the Deposit Insurance Fund, and that applies strictly to the principal amount up to Tk 200,000,” said one administrator. “We cannot disburse interest or other credited funds at this stage.”
He added that once the situation stabilizes and liquidity conditions improve, all normal banking transactions-including interest payments and remittance withdrawals-will gradually return to normal. “Customers should understand that this is a temporary phase,” the administrator said. “Our goal is to protect depositors and restore confidence as quickly as possible.”
Anxiety Among Small Savers: For many small depositors, however, the reassurances offer little immediate comfort. “I deposited my retirement savings in a savings account,” said Abdul Karim, a depositor at one of the banks in Dhaka. “The principal is within Tk 200,000, but the interest that accumulated over the years is also my money. Now I’m told I can’t withdraw that. How long will this continue?”
Similar concerns were echoed by expatriate families who depend on remittance inflows for household expenses. “My son sends money every month from abroad,” said Rahima Begum, another depositor. “The money is coming into my account, but I can’t withdraw it. How am I supposed to run my family?”
Economists Warn of Confidence Risks: Economists warn that prolonged uncertainty could undermine depositor confidence not just in the five banks, but in the broader banking system.
Dr Khandaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD), told Daily Industry that clarity and communication are critical at this stage.
“When depositors do not fully understand what they can and cannot withdraw, panic can spread very quickly,” he said. “The authorities must clearly explain the rules regarding interest, remittances, and joint accounts. Otherwise, even a well-intentioned merger could backfire.”
He added that Bangladesh’s deposit market is relatively narrow, making trust a crucial factor. “For many people, banks are the only formal place to save. Any erosion of confidence has long-term consequences.”
Banking Sector Already Under Strain: The merger initiative comes at a time when Bangladesh’s banking sector is already grappling with historically high default loans, liquidity stress, and governance challenges. According to Bangladesh Bank data, non-performing loans have surged to record levels, prompting regulators to take tougher measures, including forced mergers, to stabilize weak banks.
Industry insiders say the five Islamic banks selected for merger were facing persistent liquidity shortages, prompting the central bank to step in.
“This merger is necessary from a systemic risk perspective,” said M Masrur Riaz, Chairman and CEO of Policy Exchange Bangladesh. “But execution matters. If depositors feel trapped or confused, the credibility of the entire reform process is at stake.”
He stressed that while protecting deposits up to Tk 200,000 is a positive step, the operational details must be depositor-friendly. “Interest income is not a luxury; for many savers, it is a critical source of livelihood.”
Call for Swift Clarification: Business leaders have also urged regulators to resolve the ambiguities quickly. The Metropolitan Chamber of Commerce and Industry (MCCI) noted that uncertainty in the banking system can spill over into the real economy by discouraging savings and investment. “When people cannot access their own money, consumption and business activity suffer,” said an MCCI official. “Clear guidelines and transparent communication are essential.”
The Road Ahead: Bangladesh Bank officials maintain that the merger scheme is designed to protect depositors and ensure long-term stability. However, bankers and analysts agree that speedy clarification on interest payments, remittances, joint accounts, and savings-linked instruments is essential to prevent panic and ensure the success of the merger.
For now, depositors continue to wait-many lining up at bank branches each day, seeking answers that frontline staff are unable to provide. As one banker put it, “The merger can only succeed if depositors feel secure. Without clarity, that security remains fragile.”
As the country watches the unfolding merger process, the handling of these unresolved issues may well determine whether this bold restructuring effort restores confidence-or deepens public mistrust in Bangladesh’s troubled banking sector.
