Unified Islami Bank, formed after Union Bank PLC and four other troubled banks merged, inherited Union Bank’s record 98% non-performing loan (NPL) ratio, meaning Tk 98 out of every Tk 100 lent had become defaulted loans.

Union Bank PLC. recorded a catastrophic loss of TK 25,794 crore last year, with net assets turning negative and effectively wiping out shareholder investments. Financial collapse prompted Bangladesh Bank to merge Union Bank with First Security Islami Bank, Global Islami Bank, Social Islami Bank and Exim Bank into Combined Islami Bank.

Merger affects approximately 75 lakh depositors who now face withdrawal limits of TK 2 lakh regardless of actual account balances. Unified Islami Bank officially began operations on December 2 this year, requiring an estimated TK 12,000 crore to protect customer deposits.

Other merged banks showed similarly alarming conditions. First Security Islami Bank's NPL ratio reached 96% with a provisioning gap of TK 53 thousand 890 crore, mostly linked to S Alam Group companies, according to media report. Global Islami Bank's actual NPL ratio stood around 95% with losses exceeding TK 1 thousand 246 crore.

Social Islami Bank recorded 62% NPL ratio with provisioning shortfall exceeding TK 20 thousand 994 crore. Exim Bank showed 48.2% NPL ratio and provisioning gap over TK 20 thousand 558 crore, placing it in high-risk category.

Bangladesh Bank Governor Ahsan H Mansur announced the merger process on June 15 this year, assuring job protection for employees. Administrator appointments were approved on September 16, with former senior secretary Dr Mohammad Ayub Miah appointed chairman on November 30.

Total injected capital reached TK 35,200 crore, comprising TK 20,000 crore from government and TK 15,000 crore through share issuance against deposits from state-controlled entities. All existing shareholder equity was cancelled, and assets and liabilities transferred to the new bank.

Bangladesh's overall banking sector NPLs surged to TK 6 lakh 44 thousand crore by November 2025, accounting for nearly 36% of total loans, according to media report. State-owned banks’ NPLs grew from Tk 84,221 crore in March to Tk 1 lakh 20 thousand crore by June, making up about 33% of their total loans. Private banks’ NPLs also increased from Tk 88,900 crore to Tk 99,900 crore, roughly 8% of their total loans.

Expert committee's white paper revealed that 10 banks previously identified as weak were technically insolvent. Bangladesh Bank approved Deposit Protection Ordinance 2025, raising insurance coverage from TK 1-2 lakh per depositor.

Concerns remain about central bank's practice of printing money to support failing banks, which experts say expanded money supply and fueled inflation. Market-driven consolidation where strong banks acquire weak ones might have been more effective, though reputational risks deterred such takeovers.

With 52 local banks operating in Bangladesh compared to India's 34 despite being 22 times smaller, and only 10 banks in genuinely good health, systemic risks persist without decisive regulatory intervention.