THE Bank Resolution Act 2026, which the parliament passed on April 10, appears to be an odious piece of legislation and is, therefore, unacceptable. The law creates the scope for previous owners of five crisis-stricken banks, the S Alam Group and the Nassa Group, to reclaim bank ownership on payment of an amount far less than what they took away from the banks. The law, an amended version of the Bank Resolution Ordinance 2025, promulgated on May 9, 2025, may allow Social Islami Bank, First Security Islami Bank, Union Bank and Global Islami Bank, previously controlled by the S Alam Group, and EXIM Bank, controlled by the Nassa Group, to be handed back to the groups for the deposit of 7.5 per cent of the total public funds injected into the banks. The remaining 92.5 per cent can be repaid at a simple interest rate of 10 per cent in two years. Any shareholders of the banks taking over the banks would need to commit to the repayment of all financial support to government and the central bank, the injection of capital for solvency, the settlement of depositors and creditors’ claims, the clearance of tax liabilities and compensation for the affected parties.
The government put in Tk 200 billion in the banks, under a process of being merged, and the central bank provided them with about Tk 470 billion, in all Tk 670 billion, whilst the S Alam Group took out Tk 1,016.34 billion in loans from the five banks and the Nassa Group took out Tk 471.71 billion from EXIM Bank. But the groups, which brought the banks down into such a deplorable state, would need to pay only Tk 50.25 billion, which is too small an amount. The law could be construed as an instrument to afford the previous owners a legal way to retake the banks, whilst they should, rather, be held to account. The previous owners could also borrow again from the banking system to finance their comeback, deepening the vulnerabilities. Experts also raise concern about moral hazard without the need for prior recovery of the misappropriated funds taken out in loans. Whilst the law would effectively reward the plunderers responsible for the collapse of the banks without first recovering the funds they had taken out, and in exchange for mere commitment, this risks undoing the entire restructuring of the banks that spanned for about a year, aimed at a merger.
The provisions laid out in the law can also weaken depositor confidence, delay the restructuring efforts and complicate efforts to put the banking sector, already strained by about Tk 5,448.32 billion in non-performing loans as of December 2025, on a stable footing. The law should, therefore, not stand.
