Govt drops bank ownership clause

The government has decided to repeal the controversial Section 18(A) of the Bank Resolution Act, 2026, following widespread criticism that the provision could allow former owners of troubled banks to regain control under certain conditions.

Finance Minister Amir Khosru Mahmud Chowdhury announced the decision in Parliament on Monday during the budget discussion.

“Based on the opinions of different stakeholders regarding Section 18(A) of the Bank Resolution Act, 2026, the government has decided to repeal the provision,” the minister said.

Reiterating the government’s position on banking sector reforms, he added: “Our message is clear. Those who looted public assets will not be spared. At the same time, depositors’ savings will be protected.”

Section 18(A), introduced when the law was enacted earlier this year, allowed former shareholders and directors of banks placed under resolution to apply to Bangladesh Bank to regain ownership of the banks’ shares, assets and liabilities.

The provision required applicants to fulfil a series of conditions, including repaying all financial support provided by the government or Bangladesh Bank, injecting fresh capital to address capital shortfalls, settling depositors’ and creditors’ claims, clearing outstanding taxes and compensating parties adversely affected during the resolution process.

Applicants were also required to comply with corporate governance, risk management and regulatory requirements, while Bangladesh Bank would retain supervisory authority over the restructured banks for two years following any ownership transfer.

Before approving any application, the central bank would have been required to conduct due diligence and obtain government approval.

Successful applicants would initially deposit 7.5 per cent of the public funds injected into the bank, with the remaining 92.5 per cent repayable within two years at 10 per cent simple interest.

Despite these safeguards, the provision drew strong criticism from opposition parties, economists, bankers and Transparency International Bangladesh (TIB), who argued that it could create a pathway for business groups previously associated with bank mismanagement to regain ownership.

Media reports also indicated that the World Bank had raised concerns over the provision. Officials from the Finance Ministry and Bangladesh Bank had earlier signalled that the government was considering its repeal.

The Bank Resolution Act established a legal framework for restructuring, resolving or merging financially distressed banks. It also paved the way for the consolidation of five financially weak Islamic banks-EXIM Bank, Social Islami Bank, First Security Islami Bank, Union Bank and Global Islami Bank.

According to published reports, the five banks collectively hold around Tk1.47 lakh crore in defaulted loans, representing nearly 79 per cent of their outstanding loan portfolios.

Union Bank has the highest default loan ratio at 98 per cent, followed by First Security Islami Bank (96 per cent), Global Islami Bank (95 per cent), Social Islami Bank (62 per cent) and EXIM Bank (48 per cent).

Except for EXIM Bank, the remaining four institutions were previously controlled by the S Alam Group, a factor that further intensified concerns over the inclusion of Section 18(A).

During the budget debate, opposition lawmakers and several treasury bench members also raised concerns about banking sector governance, rising defaulted loans, the recovery of laundered assets and the possible use of public funds to support weak banks.

Several lawmakers argued that taxpayers’ money should not be used to rehabilitate those responsible for financial irregularities, while urging the government to strengthen accountability and accelerate reforms in the banking sector.