The audited financial statements for the year 2025 have confirmed a state of severe financial exigency at Islami Bank Bangladesh PLC. The institution, formerly the premier private sector lender in Bangladesh, reported that its classified loans surged by 44%, reaching a total of Tk94,322 crore. This represents the most significant volume of defaulted debt ever recorded by a single bank in the nation’s history.
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Systemic Impact and Default Ratio
The rapid accumulation of non-performing loans (NPLs) has significantly eroded the bank’s asset quality. By the end of 2025, bad debt comprised 51% of the bank’s total investment portfolio, a sharp rise from 42.36% at the close of 2024.
This crisis within Islami Bank has broader implications for the national economy. Bangladesh Bank data indicates that the total classified loans for the entire banking sector reached Tk5.57 lakh crore by December 2025. Consequently, Islami Bank alone accounts for approximately 17% of the total defaulted debt in the country. For context, the second-highest volume of classified loans is held by Janata Bank, which recorded Tk72,804 crore during the same period.
Management has linked this unprecedented surge to the revelation of “hidden” liabilities associated with the S Alam Group. Officials stated that previous executives had systematically concealed these irregularities, and the transition to new management has led to the verification and disclosure of the actual figures.
Audit Findings and Provisioning Deficit
The 2025 audit, performed by Mahfel Huq and Co, Chartered Accountants, issued a qualified opinion regarding the bank’s financial health. The report identifies a critical gap between required and actual provisioning against bad assets.
| Provisioning and Capital Metrics (2025) | Amount (in Crore Tk) |
| Total Required Provision | 92,537.56 |
| Maintained Provision | 7,922.41 |
| Total Provision Shortfall | 84,615.15 |
| Required Regulatory Capital | 19,200.91 |
| Reported Capital | 9,855.19 |
| Actual Capital Shortfall (Adjusted) | 93,960.92 |
The auditors noted that by failing to account for the full provision shortfall, the bank significantly overstated its net profit, equity, and assets while understating its total liabilities.
Regulatory Forbearance and Operational Status
The audit firm raised serious concerns regarding the bank’s “going concern” status. The financial statements were prepared under the assumption of continued operation solely because of the extraordinary regulatory forbearance granted by the central bank. Without this ongoing policy support from Bangladesh Bank, the bank’s ability to remain functional would be compromised.
While the bank officially reported a Capital Adequacy Ratio (CRAR) of 6.42%, it fell far short of the mandatory 12.50%. Furthermore, the auditor observed that without the central bank’s specific intervention, the bank would have suffered a solo aggregate loss of Tk84,507.83 crore in 2025. On 28 April 2026, Bangladesh Bank granted the lender permission to finalise its statements without full provision adjustment, provided the shortfall was disclosed and a board-approved action plan was submitted within one month.
Exposure to S Alam Group and Market Standing
The bank’s collapse is largely attributed to concentrated exposure to the S Alam Group. Major loan figures disclosed include:
S Alam Vegetable Oil: Tk14,899 crore
S Alam Super Edible Oil: Tk12,983 crore
S Alam Steels and Refined Sugar Industries: Tk10,394 crore
Financially, net investment income dropped by 40% to Tk1,847 crore in 2025. Although a nominal net profit of Tk136 crore was reported through regulatory concessions, the bank failed to declare a dividend for the second consecutive year. Consequently, the stock exchange has downgraded the bank to the ‘Z’ or junk category. Currently, 83% of the bank’s shares, previously linked to the S Alam Group, remain confiscated under central bank orders, with the share price stagnant at the floor price of Tk32.60.