Islami Bank faces corporate client concerns amid leadership vacuum

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Islami Bank Bangladesh is facing operational challenges and growing concerns among corporate customers as the country’s largest bank by deposits and loans continues to operate with a one-member board and no regular managing director.

Bank officials said loan proposals are generally moving through the normal process but are often being delayed at the final approval stage, where higher-level authorisation is required. The delays are affecting loan renewals, credit-limit increases, new loan facilities and major import and export financing.

The situation is also affecting businesses that depend on Islami Bank for salary payments, letters of credit and working capital. Some companies are reportedly facing delays in receiving financing or opening letters of credit, creating difficulties for their regular operations.

A deputy managing director said the absence of a full board has raised concerns among some long-standing corporate customers about continuing their business with the bank. The lack of a full board has also made it difficult to approve new lending and investments.

The bank has been without a regular managing director for around three and a half months. Former MD Omar Faruk Khan was sent on leave on April 13 and later resigned after being unable to return. The bank is currently being run by an acting managing director.

Bangladesh Bank officials said the managing director position normally cannot remain vacant for more than three months, although the central bank can extend the period for a reasonable cause. The bank is also facing difficulties in renewing the contracts of several senior executives because major decisions require approval from a full board.

On June 14, Bangladesh Bank dissolved Islami Bank’s entire board and assigned board responsibilities to its executive director Mohammad Zahir Hossain. A full board has yet to be formed, with Bangladesh Bank continuing to screen candidates.

The leadership uncertainty comes alongside renewed protests involving employees dismissed from Islami Bank and a group identifying itself as the Sacheton Grahok Forum. Rival programmes escalated into clashes and stone-throwing last week, leaving more than 50 people injured, according to leaders of both sides. Bangladesh Bank is examining alleged irregularities related to the employees’ recruitment and dismissal.

The bank has also experienced a decline in deposits and a rise in defaulted loans. Its deposits have fallen from Tk 1.85 lakh crore to Tk 1.61 lakh crore, while non-performing loans reached Tk 98,914 crore at the end of June, equal to 52 percent of its total loans.

Islami Bank recorded an operating loss of around Tk 1,285 crore during the first six months of this year. Bank officials said renewed instability has limited business and trade expansion, while the bank has mainly focused on collecting deposits.

Economists said prolonged vacancies in senior leadership positions could weaken customer confidence, particularly among corporate clients that depend on timely banking decisions and services.