Daily Advisor

Situation

Bangladesh Bank has reversed its earlier resolution treatment and now guarantees full deposit principal and entitled profit returns at Sammilito Islami Bank. The central bank scrapped the directive that had withheld profits and stated that no haircut will apply to principal deposits or profit returns [The Business Standard, 26 August 2026]. The Governor has instructed the bank to notify all account holders clearly that their deposits and accrued profits are protected in full, after lingering public confusion following parliamentary statements by the Finance Minister [The Asian Age, 26 August 2026]. From 1 September 2026, individual retail depositors will be permitted to withdraw principal sums from Al-Wadiah current accounts, Mudaraba savings accounts, and Mudaraba term deposit accounts based on individual requirements [The Business Standard, 26 August 2026]. This follows the phasing out of temporary central bank administrators and the transfer of operational management to the new board and executive team [The Business Standard, 6 August 2026]. The policy problem has now shifted from stopping deposit flight to repairing a very weak asset base without creating an open-ended public liability.

Evidence

• Sammilito Islami Bank PLC was formed by consolidating five troubled Shariah-compliant banks: EXIM Bank PLC, First Security Islami Bank PLC, Social Islami Bank PLC, Global Islami Bank PLC, and Union Bank PLC [bdnews24.com, 25 August 2026].
• Before restructuring, total deposits across the five banks were approximately Tk 1.52 trillion, total loans exceeded Tk 2 trillion, and retail individual deposits accounted for roughly Tk 460 billion [The Business Standard, 21 September 2025].
• Combined non-performing loans stood at Tk 1.66 trillion as of end-March 2026, an NPL ratio of 84.22 percent [bdnews24.com, 25 August 2026].
• The bank is capitalised at Tk 350 billion in paid-up capital and Tk 400 billion in authorised capital, making it the largest and only state-owned Islamic bank [The Business Standard, 26 August 2026]. The government provided Tk 200 billion in equity support [Muslim Network TV, 31 December 2025].
• The bank operates 760 branches, 698 sub-branches, 511 agent banking outlets, and 975 ATM booths [bdnews24.com, 25 August 2026].
• The initial 14 January 2026 decision to withhold or deduct profit returns on 2024 and 2025 deposit balances has now been reversed [Daily Sun, 25 August 2026].
• The instruction lifts previous withdrawal limits set under the resolution repayment roadmap of 29 December 2025 [UNB, 25 August 2026].
• The Deposit Protection Act 2026, passed in April 2026, doubled the statutory insured payout limit per depositor from Tk 100,000 to Tk 200,000 [The Business Standard, 10 April 2026].

Prescription

1. Bangladesh Bank: Codify the full principal and profit guarantee in a written circular before the 1 September 2026 withdrawal date. The circular should direct Sammilito Islami Bank to deliver account-level confirmation to all holders of Al-Wadiah current, Mudaraba savings, and Mudaraba term deposit accounts, using the bank's 760 branches, 698 sub-branches, 511 agent banking outlets, and 975 ATM booths as notification and query points [The Business Standard, 26 August 2026; bdnews24.com, 25 August 2026]. This converts the Governor's directive into a supervisory obligation.
2. Ministry of Finance: Publish the fiscal backstop arrangement behind the full guarantee. The note should distinguish the Tk 200 billion government equity support already provided [Muslim Network TV, 31 December 2025] from the statutory insured payout of Tk 200,000 per depositor under the Deposit Protection Act 2026 [The Business Standard, 10 April 2026]. It should state whether the equity support acts as the first-loss buffer and whether additional budget authority would be required if deposit outflows exceed available liquidity.
3. Bangladesh Bank: Introduce high-frequency liquidity surveillance for Sammilito Islami Bank without reimposing the withdrawn limits. Monitoring should capture principal withdrawals from Al-Wadiah current, Mudaraba savings, and Mudaraba term deposit accounts once access takes effect on 1 September 2026 [The Business Standard, 26 August 2026]. Reporting should be disaggregated across branches, sub-branches, agent banking outlets, and ATM booths [bdnews24.com, 25 August 2026] so supervisors can detect concentrated withdrawal pressure early.
4. Sammilito Islami Bank board and executive team: Present a public balance sheet repair plan tied to the central bank's instruction to transition to full regular commercial banking operations [The Business Standard, 26 August 2026]. The plan must address the Tk 1.66 trillion NPL stock and the 84.22 percent NPL ratio [bdnews24.com, 25 August 2026] with specific recovery, sale, and provisioning actions. Bangladesh Bank should review this plan before any further capital support is committed.
5. Ministry of Finance and Bangladesh Bank: Clarify how the full guarantee interacts with the Deposit Protection Act 2026. Because the guarantee exceeds the statutory insured payout of Tk 200,000 per depositor [The Business Standard, 10 April 2026], the two institutions should issue a joint statement on whether the guarantee is temporary, how it will be phased down, and what triggers would require returning to the statutory payout framework.

Risks and tradeoffs

The guarantee is broader than the statutory safety net. Deposit Protection Act 2026 protects only Tk 200,000 per depositor, but Sammilito Islami Bank is now committed to full principal and profit protection [The Business Standard, 10 April 2026; The Business Standard, 26 August 2026]. If loan recovery fails against an NPL stock of Tk 1.66 trillion at an 84.22 percent NPL ratio, the contingent fiscal cost will exceed the Tk 200 billion equity support already provided [bdnews24.com, 25 August 2026; Muslim Network TV, 31 December 2025]. Deposit outflows may concentrate from 1 September because the earlier 29 December 2025 withdrawal limits have been lifted [UNB, 25 August 2026; The Business Standard, 26 August 2026]. Retail deposits of roughly Tk 460 billion are only part of a deposit base of about Tk 1.52 trillion, so confidence among larger depositors remains the binding test [The Business Standard, 21 September 2025]. The reversal of the 14 January 2026 profit deduction decision also means the bank may be required to pay profit returns on 2024 and 2025 balances even where underlying assets are non-performing [Daily Sun, 25 August 2026]. If communication is uneven across the branch network, the public confusion following the Finance Minister's parliamentary statements could persist [The Asian Age, 26 August 2026].

Bottom line

The full deposit guarantee removes immediate depositor uncertainty but shifts residual risk onto the public balance sheet. The correct sequence is written notification before 1 September, fiscal backstop clarity, liquidity surveillance, and a published NPL repair plan.