Tear gas and water cannons choked the streets of Motijheel on Monday morning as police clashed with furious protestors outside the headquarters of Islami Bank Bangladesh PLC. The violence erupted immediately after the central bank appointed Mohammad Khurshid Alam as the new chairman, a move that triggered a fast, aggressive backlash from a coalition of depositors and employees known as the Islami Bank Customer Forum. To the casual observer, it looks like a localized corporate dispute. It is not. The street battles in Dhaka’s financial district are the explosive symptoms of a systemic banking collapse that is pushing the South Asian nation toward financial ruin.
What the superficial news bulletins fail to report is that this confrontation is the direct consequence of a multi-year, state-sanctioned looting of the country's private financial sector. For nearly a decade, politically connected conglomerates systematically hollowed out the nation’s largest private lenders. The appointment of a new chairman is not an administrative routine. It is a high-stakes struggle for control over what remains of the bank's carcass, pitting a desperate interim government against the deeply entrenched networks of the ousted regime.
The Mirage of the Sharia Takeover
To understand why a chairman’s appointment sparks riots, one must trace the original sin back to 2017. In a series of maneuvers engineered by intelligence agencies under the former Awami League government, the S. Alam Group—a massive, politically favored conglomerate—seized control of Islami Bank Bangladesh. Board members were allegedly forced to resign at gunpoint.
Once in control, the conglomerate treated the institution as a private piggy bank. Billions of dollars in depositors' savings were systematically drained through insider lending, shell companies, and fraudulent paperwork. International Monetary Fund (IMF) data reveals that by the time the regime collapsed during the 2024 mass student uprising, the banking sector was suffocating under a mountain of non-performing loans (NPLs). Systemwide NPLs skyrocketed to a staggering 34 percent.
The protestors outside the bank are not merely angry about a name on a letterhead. They are terrified. Depositors have watched five major Islamic banks, all previously controlled by the same corporate cabal, collapse into a heap of toxic debt. The central bank recently engineered a forced nationalization and merger of these insolvent institutions. To make matters worse, the central bank decided to retroactively claw back previously paid profits from depositors' accounts for 2024 and 2025, claiming the banks actually operated at massive losses. It was a move that effectively penalized everyday savers for the institutional theft perpetrated by the elite.
The Invisible Strings of Political Appointment
The newly appointed chairman faces an impossible mandate. Protesters argue that the appointment represents a continuation of bureaucratic interference rather than a genuine cleanup. The Customer Forum claims that the selection lacks Sharia credibility and serves as a tool for the current state apparatus to manage the political fallout rather than recover the stolen assets.
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| THE ISLAMI BANK COLLAPSE TIMELINE |
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| 2017: Intelligence-backed hostile takeover by elite |
| conglomerates. Board replaced under duress. |
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| 2018-2024: Massive insider lending. Billions drained |
| via shell companies. Reserves depleted. |
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| 2024: Political regime collapses. Conglomerate heads |
| flee. Central bank uncovers massive losses. |
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| 2026: Forced mergers. Central bank freezes depositor |
| profits. Clashes erupt over new chairman. |
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The underlying mechanism of banking supervision in the country has long been broken. When a private bank falls into distress, the standard playbook involves injecting liquidity to keep the doors open. Between 2023 and 2024, the central bank raised its policy rate to 10 percent to fight inflation, but simultaneously pumped massive emergency liquidity into dying banks. This completely jammed the transmission of monetary policy. The state was essentially printing money to subsidize insolvent boards while the broader economy starved for legitimate credit.
The Cost of Regulatory Forbearance
For years, international financial institutions warned that the regulatory framework was a fiction. Stricter asset classification policies introduced recently only confirmed what independent analysts knew all along: the books were cooked. The nationalization and merger of the five failed Islamic banks alone absorbed resolution funding amounting to roughly half a percent of the nation's GDP.
This brings us to the core issue. The state cannot afford to bail out these institutions without triggering hyperinflation, yet it cannot let them fail without destroying the public’s remaining trust in the financial system. The decision to penalize depositors by deleting their 2024 and 2025 profit allocations is an admission of absolute desperation. It signals that the state has run out of money and is now cannibalizing the savings of the middle class to keep the institutional infrastructure from turning to ash.
The unrest in Motijheel is a warning shot. The streets are reacting to the terrifying realization that their money is gone, and the people who stole it are long gone, living in luxury abroad. The new chairman is stepping onto a sinking ship with a crew that mutinied years ago.
No Easy Way Out
The central bank's defense of its actions relies on a strict interpretation of Islamic finance rules, asserting that since the banks lost money, the depositors must share in the loss. While theoretically accurate under profit-and-loss sharing models, it ignores the reality that the losses were not the result of bad business investments, but rather outright criminal embezzlement.
Stabilizing this mess requires a brutal, uncompromising approach that goes far beyond changing the leadership at the top.
- Absolute Asset Trace: A forensic tracking of all funds diverted through the S. Alam Group and its subsidiaries, followed by the immediate liquidation of their domestic physical assets to repay depositors.
- An End to Forbearance: The central bank must stop hiding toxic assets through extended grace periods and artificial accounting tricks. Weak banks must be allowed to wind down transparently rather than being forced into artificial mergers that infect healthier institutions.
- Independent Board Selection: Future appointments must be stripped entirely of political or bureaucratic influence, utilizing independent international panels to verify the competence and integrity of bank leadership.
The smoke from the tear gas in Dhaka will eventually clear, but the underlying rot in the financial sector remains. If the interim government continues to treat this as a political management problem rather than a deep structural emergency, the clashes outside Islami Bank will look like a minor prelude to a total economic collapse.
