Islami Bank Bangladesh PLC has sought Tk 6,000 crore in equity investment from the government or a government-owned institution, a move that could pave the way for the government to acquire a 78.8 per cent stake in the country’s largest private commercial bank.

If the proposal is approved, the government could take control of the bank’s ownership and management. However, the government has yet to give its consent to the proposal.

The bank has proposed issuing 600 crore new shares at a face value of Tk 10 each to increase its paid-up capital from Tk 1,609.99 crore to Tk 7,609.99 crore. The proposal was included in its Capital Restoration Plan 2027-2033, submitted to Bangladesh Bank on April 4.

Following the proposal, Bangladesh Bank’s Banking Regulation and Policy Department sent a letter to the secretary of the Financial Institutions Division under the Ministry of Finance on November 9, seeking the government’s position on the proposed investment.

According to the letter, Islami Bank has requested capital investment from the government or a government institution through the issuance of new shares. However, the decision on the government’s strategic participation in the bank’s capital rests with the government.

A senior official of Islami Bank said the proposal was made to prevent former owners from regaining influence over the bank by purchasing newly issued shares. Government investment would help reduce the bank’s capital shortfall while diluting the ownership stake of shareholders linked to S Alam Group.

The official added that once the bank’s financial position improves, the government could sell its shares to general investors.

However, former Bangladesh Bank governor Ahsan H Mansur has criticised the proposal, describing it as a wrong move. He argued that government ownership does not necessarily ensure greater efficiency and could expose the government to the risk of losing Tk 6,000 crore.

Instead, he suggested seeking investment from the bank’s former foreign shareholders or attracting new foreign investors. He also recommended raising capital from domestic private investors under strict regulatory supervision.

Fahmida Khatun, distinguished fellow at the Centre for Policy Dialogue (CPD), said the government’s investment proposal should be considered with extreme caution. She stressed the need to assess the bank’s capital position and asset quality before making any decision.

She also called on Bangladesh Bank to play an active role in restoring and maintaining the bank’s financial strength.

According to Bangladesh Bank data, Islami Bank’s total loans stood at Tk 181,860 crore at the end of September, of which Tk 100,600 crore had turned into non-performing loans. The bank’s provision shortfall stood at Tk 85,886 crore during the period.

The bank reported a net loss of Tk 3,303 crore after tax during January-September this year, compared with a profit of around Tk 79 crore in the corresponding period last year. Its losses amounted to Tk 1,976 crore in the July-September quarter alone.

During the Awami League government’s tenure, S Alam Group and 24 entities linked to its interests acquired approximately 131.35 crore to 131.89 crore shares of Islami Bank through direct and indirect ownership arrangements.

Together, they held between 81.59 per cent and 81.92 per cent of the bank’s total shares. These shares are currently frozen under court orders.

The remaining 18.08 per cent to 18.41 per cent shares are held by general and institutional investors.

The bank’s former foreign shareholders included the Islamic Development Bank, Dubai Islamic Bank and Kuwait Finance House.