Bank Mergers in Bangladesh: Voluntary, Compulsory and Resolution Routes in 2026

Bank mergers in Bangladesh: the three routes in 2026

Bank mergers in Bangladesh used to be a policy aspiration that rarely happened. Since 2025 they have become an instrument of state: the Bank Resolution Ordinance 2025 gave Bangladesh Bank the power to declare a bank non-viable and transfer its business, five Shariah-based banks were folded into a new state-owned lender, Sammilito Islami Bank, and Parliament re-enacted the regime as the Bank Resolution Act 2026.[2] [9] A bank can now combine with another by choice, by regulatory compulsion under the Bank Company Act 1991 or by resolution, and the route decides what shareholders, depositors, employees and borrowers end up with.

This briefing explains each route and the approvals behind it, then walks through the Sammilito transaction as the leading case. It covers shareholders' and creditors' rights, depositor protection under the Deposit Protection Act 2026, the position of staff, and what borrowers and counterparties should do when their bank is merged. It is written for bank boards and investors, corporate treasurers with large deposits, and borrowers whose facilities sit with weaker lenders.

Summary: Bank mergers in Bangladesh now run on three tracks: voluntary amalgamation with Bangladesh Bank's prior approval under section 77(16) of the Bank Company Act 1991; compulsory amalgamation under sections 77 and 77A of that Act; and resolution under the Bank Resolution Act 2026, which lets Bangladesh Bank declare a bank non-viable and transfer its shares, assets and liabilities. In the first resolution merger, five Islamic banks became Sammilito Islami Bank, shareholders received nothing, and depositors were repaid in priority tiers.

Key point: In a resolution merger, shareholders of a failed bank should assume they will be written off. The High Court summarily rejected a challenge by an investor in one of the five banks in December 2025, and officials had said shareholders would receive no shares in Sammilito Islami Bank because their equity was already negative.[7]

At a glance

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Table of Contents

How bank mergers in Bangladesh work in 2026

Three distinct legal mechanisms now produce bank mergers in Bangladesh, and they should not be confused. Each has a different trigger, decision-maker and outcome for the people with money in the bank.

• Voluntary amalgamation: two healthy or reasonably healthy banks agree to combine and seek Bangladesh Bank's prior approval under section 77(16) of the Bank Company Act 1991.[1]
• Compulsory amalgamation: Bangladesh Bank, with the government, imposes a moratorium and an amalgamation scheme under section 77, or uses section 77A after a failed recovery plan.[1]
• Resolution: Bangladesh Bank declares a bank non-viable under the Bank Resolution Act 2026 and uses its tools, which include transferring shares, assets and liabilities to a third party, a bridge bank or temporary public ownership.[2]

In practice the first route has rarely produced a completed deal, the second was overtaken by the third, and the third is where the action has been since 2025. The commercial question for any stakeholder is therefore not only whether a merger is coming, but which statute it will run under.

Why the regulator pushes consolidation

Bangladesh Bank paired its 2024 merger guidelines with a Prompt Corrective Action framework that categorises banks by non-performing loans and capital adequacy, and said it would move banks that failed to improve into mergers.[12] Section 77A of the Bank Company Act gives that policy statutory force.[1] Consolidation is therefore a standing supervisory goal rather than a reaction to a single crisis.

The statutory framework behind bank mergers

The Bank Company Act 1991

The Bank Company Act remains the prudential code. Section 77 has always contained a compulsory scheme: Bangladesh Bank may apply to the government for a moratorium on a bank's business and on proceedings against it, and while the moratorium is in force Bangladesh Bank may frame a scheme to reconstruct the bank or amalgamate it with a transferee bank.[1] Section 77(16), added in 2013, permits a bank to merge voluntarily with another bank or financial institution, or to transfer part of its business, with Bangladesh Bank's prior approval and in line with its policy.

Section 77A, added in 2023, lets Bangladesh Bank take prompt corrective action and, if a recovery plan fails, order compulsory amalgamation or reconstruction subject to section 77.[1]

The Bank Resolution Ordinance 2025

The interim government's Bank Resolution Ordinance 2025, a 67-page instrument approved by the Advisory Council on 17 April 2025, was published on 9 May 2025.[5] It allowed Bangladesh Bank to appoint temporary administrators, require recapitalisation, transfer shares, assets and liabilities to a third party, establish bridge banks, suspend business, take a bank into temporary state ownership, and apply to court for liquidation. It also created a seven-member Banking Sector Crisis Management Council led by the governor.[5] Bangladesh Bank formed a Bank Resolution Department in July 2025 and issued Regulations for Bank Resolution in October 2025.[4]

The bodies that take part in a bank merger or resolution are summarised below.

The Bank Resolution Act 2026

Parliament enacted the Bank Resolution Act 2026 as Act No 88 of 2026, dated 10 April 2026.[3] Section 74 repeals the Ordinance (Ordinance No 19 of 2025) and provides that anything done under it is treated as done under the Act.[2] The Sammilito resolution therefore stands on a statutory footing. Section 8 confirms that the Bank Company Act and Bangladesh Bank's directions continue to apply to a bank in resolution for regulatory requirements, without limiting the resolution powers.[2]

The Act is longer than its predecessor and organised around eight chapters: resolution authority, temporary administration, resolution tools, the crisis management council, liquidation, misuse of bank assets, offences and miscellaneous provisions. Section 71 extends it to finance companies.[2] Bangladesh Bank issued Temporary Administration Regulations 2026 and an order applying the Act to finance companies in August 2026.[4]

The section 18A episode

When the elected government re-enacted the Ordinance, it inserted section 18A, which allowed pre-resolution shareholders to apply to Bangladesh Bank to reacquire a resolved bank's shares, assets and liabilities. The provision had not been in the Ordinance and drew criticism that former owners of the five merged banks could return. On 9 September 2026 Parliament passed a Bank Resolution (Amendment) Bill repealing it, the Finance Minister stating that no applicant had met its conditions.[10] The amending law is Act No 108 of 2026, dated 14 September 2026, and the official text now shows section 18A as repealed.[3] [2]

Voluntary bank mergers in Bangladesh: approvals and process

A voluntary merger needs Bangladesh Bank's prior approval under section 77(16) and compliance with its merger policy.[1] In April 2024 Bangladesh Bank issued guidelines covering voluntary and compulsory mergers, allowing one or several banks to merge and non-bank financial institutions to merge with banks, with foreign bank branches merging through their parents.[12]

Incentives and conditions in the 2024 guidelines

The guidelines offered transferee banks relaxations on minimum capital, provisioning, CRR, SLR, LCR and NSFR, central bank liquidity support through bonds, permission to raise share capital and subordinated debt, and transfer of accumulated losses to goodwill. The board and management of the transferor bank would be disbanded, its directors barred from the transferee's board for five years, and regular employees retained for three years.[12] For a compulsory merger, Bangladesh Bank would confidentially invite expressions of interest, and bidders could price at a premium or discount to the net valuation of the transferor's assets and liabilities.[12]

Ownership limits that shape deal structure

Section 14A bars any person, company or family from acquiring more than 10 per cent of a bank's shares, and section 14B requires Bangladesh Bank's prior approval to become a significant shareholder, meaning holding more than 5 per cent.[1] A share-for-share merger can push a sponsor group over either line. Model the post-merger register before signing heads of terms, and build the approvals or a sell-down into the timetable.

Why the 2024 round did not deliver

By April 2024 Bangladesh Bank had identified ten weak banks for merger, and EXIM Bank had announced its intention to absorb Padma Bank.[12] Eighteen months later EXIM was itself one of the five banks declared failed and folded into Sammilito.[4] [12] The lesson for boards is that a voluntary merger with a weak counterparty can import losses large enough to sink the acquirer, and that regulatory incentives do not change the underlying asset quality. Due diligence on classification, collateral and related-party exposure is the transaction.

Practical sequence

A voluntary deal typically moves through board approvals, confidential engagement with Bangladesh Bank, due diligence and valuation, a merger agreement, shareholder approval, regulatory approval and court or scheme mechanics, with stock-exchange disclosure along the way for listed banks. The corporate scheme mechanics are covered in our guide to the merger procedure in Bangladesh, and competition filing in our analysis of merger notification under competition law.

Compulsory amalgamation under the Bank Company Act

Section 77 is a complete code for a forced merger. Bangladesh Bank applies to the government for a moratorium; the government may suspend the bank's business and bar or stay proceedings against it for a fixed period, extendable by up to six months. During the moratorium the bank may not pay depositors or discharge liabilities except as the order allows.[1]

What the scheme can do

The scheme may transfer the bank's business, property, assets and liabilities to the transferee bank, change the board, amend the memorandum, continue pending proceedings by or against the transferee, and reduce the pre-amalgamation interests or claims of members, depositors and other creditors as Bangladesh Bank considers necessary.[1] Members may receive shares in the transferee on the basis of their original or reduced holdings, or cash where shares cannot be allotted.[1]

Consultation, approval and effect

Bangladesh Bank must send the draft scheme to the bank, the transferee and other banks concerned for objections and suggestions, may modify it, and then submits it to the government, which approves it with or without changes. The approved scheme is laid before Parliament, binds the banks, members, depositors, creditors, employees and fund trustees, and vests the property and liabilities in the transferee. The government may exempt the acquired business from provisions of the governing law for up to seven years.[1] Section 77 overrides any other law, contract or instrument.[1]

Resolution under the Bank Resolution Act 2026

Resolution is the route used for the largest bank mergers in Bangladesh to date, and it is designed to move fast.

When Bangladesh Bank can act

Under section 14 Bangladesh Bank may decide to resolve a scheduled bank if it is satisfied that the bank is non-viable or likely to become so and that supervisory action will not restore it. The triggers include a regulatory or capital failure serious enough to justify licence cancellation, actual or likely insolvency, inability to meet obligations to depositors or creditors, and fraudulent use of the bank's assets by its ultimate beneficial owners, defined as natural persons who directly or indirectly own or control 2 per cent or more of its shares.[2] Prompt corrective action does not prevent resolution.

Once it decides, Bangladesh Bank must notify the bank in writing and must exercise at least one resolution power within 30 days. From then the bank operates under Bangladesh Bank's control.[2]

The resolution toolkit

Chapter IV sets out the tools: recapitalisation by existing or new shareholders (section 25), transfer of shares, assets and liabilities to a third party (sections 26 and 27), bridge banks (sections 28 and 29), write-down or conversion of capital and eligible liabilities (section 30), special application to Islamic banks (section 31), government support (section 32), temporary public ownership (section 33), and financial contributions from the Bank Restructuring and Resolution Fund and the Deposit Protection Fund (sections 34 and 35).[2] Section 37 deals with compensation to shareholders and creditors, and section 49 with the priority of claims in liquidation.[2]

Courts and challenges

The Act contains provisions on applications to stay court proceedings, on court judgments against the implementation of resolution decisions and, in section 68, a rule that an appeal does not affect Bangladesh Bank's resolution decisions and actions.[2] The practical effect is that litigation may lead to compensation, but it is unlikely to unwind a completed transfer. Challengers should frame their case around valuation and compensation from the outset.

Personal liability of those responsible

Chapter VII addresses fraudulent use and misuse of bank assets, accounts of misused funds, asset statements of responsible persons and recovery powers, and Chapter VIII creates offences by directors and officers.[2] Former directors and sponsors of a resolved bank should expect forensic scrutiny and recovery action. Special forensic audits into the five banks were under way in July 2026.[14]

The Sammilito Islami Bank merger: how it unfolded

The Sammilito transaction is the template for future resolution-led bank mergers in Bangladesh, so its sequence is worth understanding.

Why these five banks

Four of the five, Social Islami, First Security, Union and Global Islami, had previously been owned by the S Alam Group, and Bangladesh Bank had seized sponsor directors' shares.[6] An asset quality review in 2025 found default rates of 28 per cent at EXIM, 60 per cent at Social Islami and 95 per cent at each of the other three, and a combined equity loss of nearly Tk 40,000 crore. The banks employed 17,785 people across 1,189 branches and sub-branches.[6]

The timeline

• 9 October 2025: the interim government approved the consolidation.[7]
• 5 November 2025: Bangladesh Bank placed the five banks under resolution.[4]
• 18 November 2025: an investor filed a writ seeking shares in the new bank; the High Court summarily rejected it on 8 December 2025.[7]
• 29 December 2025: Bangladesh Bank issued the Bank Resolution Scheme 2025, later amended up to 9 August 2026.[4] [8]
• 1 and 7 September 2026: normal transactions for individual customers were due to resume, with full principal refunds starting on 7 September.[9]

Capital and balance sheet

Sammilito has a paid-up capital of Tk 35,000 crore, of which the government provided Tk 20,000 crore, while shares are to be issued to depositors against the remaining Tk 15,000 crore. The five banks held about Tk 1,42,000 crore belonging to roughly 76 lakh depositors, and about 86 per cent of Tk 1,92,000 crore in loans were in default.[9] Collateral covered only 24.56 per cent of outstanding loans at the end of 2025.[11]

Shareholders' and creditors' rights in a merger

Shareholders fare worst in resolution-led bank mergers in Bangladesh. Officials said before the merger that shareholders of the five banks would receive no shares in Sammilito because their equity was negative, and the High Court rejected the investor's writ summarily.[7] The investor's counsel said the court's reasoning was that the Ordinance contained no provision safeguarding shareholders in a merger.[7]

Where shareholders can still look

Two avenues remain. Section 37 of the Act addresses compensation to shareholders and creditors, and the valuation under section 17 determines the baseline.[2] Where a merger runs under section 77 of the Bank Company Act instead, the scheme may allot shares in the transferee or pay cash, although it may first reduce members' interests.[1] Minority investors in a weak listed bank should value their holding on the assumption that resolution could wipe it out, and should preserve evidence of trading and disclosures in case a compensation claim becomes available.

Institutional creditors and conversion

The Sammilito scheme converted about Tk 7,500 crore of fixed deposits held by banks and financial institutions into Class-B shares, and partly converted deposits of other institutions and trusts into shares with the possibility of future dividends.[8] This is in substance a bail-in of institutional funding. Treasuries placing large term deposits with weaker banks should price that risk and diversify, rather than rely on deposit insurance that stops at Tk 2 lakh.

Depositor protection when banks merge

The Deposit Protection Act 2026

The interim government issued the Deposit Protection Ordinance 2025 (Ordinance No 64 of 2025), and Parliament replaced it with the Deposit Protection Act 2026, Act No 75 of 2026, dated 10 April 2026.[4] [3] The Act repealed the Bank Deposit Insurance Act 2000 and doubled cover from Tk 1 lakh to Tk 2 lakh per depositor. All scheduled banks and finance companies must be members, finance companies by 1 July 2028, and separate protection funds for banks and finance companies are held at Bangladesh Bank with its board as trustee.[13]

On liquidation the liquidator must send the depositor list to Bangladesh Bank within 10 working days, and protected amounts must be paid within the following seven working days. The limit is to be reviewed every three years, and a depositor with more than the limit can claim the balance from the liquidator.[13] Section 35 of the Bank Resolution Act also allows the deposit protection fund to contribute to a resolution, not only a liquidation.[2]

How the Sammilito depositors were treated

The December 2025 scheme gave individuals with balances up to Tk 2 lakh full access, removed limits for depositors with cancer or needing kidney dialysis, and released larger balances in tranches of Tk 1 lakh every three months, with full access taking up to 24 months. Term deposits were rolled over automatically, often at a rate one percentage point below the bank rate.[8] In July 2026 Bangladesh Bank extended withdrawals of up to Tk 10 lakh to family medical and other urgent needs, and reported that Tk 3,887 crore had been paid to 822,000 depositors from Tk 12,000 crore allocated from the deposit insurance fund.[11]

On 8 July 2026 the Finance Minister told Parliament that depositors of the troubled banks would receive their full deposits with interest and no haircut, though the process would take time.[14] From 7 September 2026 individual customers could withdraw their entire principal at once, without profit on the amount withdrawn, while those keeping their accounts would continue earning contractual rates.[9]

Practical points for depositors

Political assurances are not the same as statutory cover. The only legally guaranteed amount is the insured limit; everything above it depends on the resolution scheme and the success of recoveries. Corporate depositors should spread balances across banks, keep transaction accounts separate from reserve deposits, and check whether a deposit could be converted into shares under a scheme, as institutional deposits were at Sammilito.[8]

Employees of merging banks

Employees' protection depends heavily on the route. Under a section 77 scheme, employees continue on the same pay and terms, but within three years the reconstructed or transferee bank must align pay and benefits with comparable staff, with Bangladesh Bank deciding disputes. Employees who give notice within one month of the scheme's approval that they do not wish to transfer receive compensation, pension, gratuity, provident fund and retirement benefits under the existing rules.[1] The 2024 guidelines similarly contemplated retention of regular employees for three years.[12]

The resolution scheme for Sammilito went further. Staff of the five banks were transferred to the new bank, its board may re-determine service conditions and reduce benefits without objection from employees, those who do not wish to stay may resign with existing benefits, and employees found guilty of fraud may be dismissed.[8] The then governor had said job security would be guaranteed for lower-level staff but not top management.[6] Senior bankers in a resolved institution should take independent advice before signing new terms or resignation papers. Our guide to terminating employees in Bangladesh explains general exit entitlements.

What bank mergers mean for borrowers and counterparties

A merger does not cancel a loan. Under a section 77 scheme, liabilities and pending proceedings pass to the transferee, and under the Bank Resolution Act shares, assets and liabilities can be transferred to a third party or bridge bank.[1] [2] A borrower of a merged bank should therefore expect the new lender to pursue recovery with more vigour, not less, because the transferee is usually under pressure to clean its balance sheet.

Practical checks for borrowers

• Documentation: confirm which entity now holds the facility and security, and obtain written confirmation of outstanding balances.
• Undrawn commitments: do not assume the transferee will honour undrawn limits or renew working capital lines on the old terms.
• Trade instruments: check the status of letters of credit, guarantees and confirmations issued by the merged bank, because beneficiaries abroad may ask for replacement or confirmation.
• Set-off: where you hold deposits with the same bank that you owe money to, take advice early on whether set-off is available under the scheme.
• Disputes: pending suits in the Artha Rin Adalat continue against the transferee; settlement windows may reopen with new management.

Our guides to defending a bank suit and bank loan laws in Bangladesh cover the recovery side, and our analysis of Islamic finance in Bangladesh explains how mudaraba deposits were treated.

A practical sequence for stakeholders

When a merger or resolution is announced, the first fortnight decides most outcomes. The sequence below is the one we follow for clients exposed to a merging bank.

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Two points apply throughout. Read every Bangladesh Bank circular and scheme amendment, because the terms changed several times during the Sammilito process, and record each communication with the bank or its administrator, because compensation and priority questions are decided on documents.

Comparing the three merger routes

The table summarises how the routes differ. On a phone, scroll it sideways.

For bank boards and sponsors, the table carries a simple message. A voluntary merger, negotiated while the bank still has equity to protect, is almost always better for shareholders than waiting for a resolution in which their stake may be extinguished.

What to watch in bank mergers in Bangladesh

Several developments will shape bank mergers in Bangladesh over the next year. Bangladesh Bank placed four finance companies under resolution in August 2026, so the toolkit is now being applied beyond banks.[4] Prompt corrective action and section 77A give the regulator a path to compulsory consolidation outside resolution, and the Bank Restructuring and Resolution Fund in section 16 of the Act gives it a source of finance.[1] [2] [12] The integration of Sammilito, its future recapitalisation and any sale of the government's stake will set the precedent for every later resolution.[9] [10]

TRW's bank resolution and creditor safeguards practice advises depositors, creditors, investors and boards on resolution schemes and voluntary mergers, and our banking and finance practice handles approvals and transaction documents. Our wider guide to the Bank Company Act 1991 sets out the prudential rules. To discuss your exposure, contact TRW in Dhaka.

Frequently asked questions

Which law governs bank mergers in Bangladesh?

Voluntary and compulsory amalgamations fall under section 77 of the Bank Company Act 1991, while mergers of failing banks run under the Bank Resolution Act 2026, Act No 88 of 2026.[1] [2]

Is the Bank Resolution Ordinance 2025 still in force?

No. Section 74 of the Bank Resolution Act 2026 repealed Ordinance No 19 of 2025 and treats everything done under it as done under the Act.[2]

Which banks were merged into Sammilito Islami Bank?

EXIM Bank, First Security Islami Bank, Global Islami Bank, Social Islami Bank and Union Bank, which Bangladesh Bank placed under resolution on 5 November 2025.[4] [9]

Did shareholders of the merged banks receive shares?

No. Officials said their equity was already negative, and the High Court summarily rejected an investor's writ on 8 December 2025.[7]

How much of my deposit is insured if my bank fails?

Up to Tk 2 lakh per depositor under the Deposit Protection Act 2026, paid within seven working days after the liquidator's depositor list reaches Bangladesh Bank. Any balance is claimed from the liquidator.[13]

Can a bank merge voluntarily with another bank?

Yes. Section 77(16) of the Bank Company Act lets a bank merge with another bank or financial institution, or transfer part of its business, with Bangladesh Bank's prior approval under its policy.[1]

When can Bangladesh Bank put a bank into resolution?

When it is satisfied the bank is or is likely to become non-viable, including through capital failure, insolvency, inability to pay depositors or fraudulent use of assets by owners of 2 per cent or more, and supervisory action will not help.[2]

What happens to employees when banks merge?

Under a section 77 scheme they keep their pay and terms, subject to alignment within three years. In the Sammilito resolution the new board may revise service conditions, and staff may resign with existing benefits.[1] [8]

Do I still have to repay my loan if my bank is merged?

Yes. Loans and pending proceedings pass to the transferee bank, which will usually pursue recovery actively.[1] [2]

Why was section 18A of the Bank Resolution Act repealed?

It let former shareholders apply to reacquire a resolved bank, raising fears that former owners could return. Parliament repealed it in September 2026 after no applicant met its conditions.[10]