Talks have started afresh centering the status of Islami Bank Bangladesh Limited (IBBL) in the country's banking sector. 

According to relevant sources, the bank's Chairman, Professor Dr. M. Zubaidur Rahman, and Managing Director, Omar Farooq Khan, submitted their resignation letters on the same day. On Sunday (May 24), Islami Bank Bangladesh PLC Chairman Professor Zubaidur Rahman submitted his resignation letter to the Governor of Bangladesh Bank. He first submitted his resignation letter to the bank's board of directors and subsequently forwarded it to the central bank.

Arif Hossain Khan, spokesperson and executive director of Bangladesh Bank, confirmed it to Khaborer Kagoj. He stated that former Deputy Governor of Bangladesh Bank Md. Khurshid Alam was appointed as the new chairman on the same day.

Md. Omar Faruq Khan, Managing Director (MD) and CEO of Islami Bank Bangladesh PLC— who was on mandatory leave— has submitted his resignation letter to the board of directors. Earlier, the board of directors decided to send both the Chairman and the Managing Director (MD) on leave, on condition that they must join the board meetings virtually. Though no official explanation has been given for their resignation, banking sector insiders state that policy disagreements with the central bank complicated the situation. According to them, an internal crisis has been brewing for a long time to keep the bank under the control of a specific political party. One faction of the bank has also raised questions regarding Bangladesh Bank's control over it.

According to them, an internal crisis began long ago to keep the bank under the control of a specific political party. One faction of the bank has also raised questions regarding the control of Bangladesh Bank. The central bank officials and banking sources say that disagreements emerged between the central bank and high-level executives of Islami Bank regarding the bank's management under the new political reality. Specifically, a faction within the bank objected to the central bank's active role in debt restructuring, board powers, management decisions, and administrative reorganization. This disagreement gradually became public.

According to economists and analysts, long-standing political interference and weakness of the regulatory body have caused this crisis in Bangladesh's banking sector. Specifically, this internal instability arose after several important financial institutions, including Islami Bank, fell under the control of a specific political group, and questions were raised regarding the role and control of Bangladesh. This disagreement gradually became public. On Sunday, the Islami Bank Customer Forum held a human-chain programme in front of Islami Bank's head office at Dilkusha in the capital. 

At that time, they demanded an end to political influence and irregularities in bank management and recruitment processes, as well as the withdrawal of the Bangladesh Bank Governor's unwarranted interference.

Sunday's protests have further escalated the current situation. Besides, a group of Islami Bank customers and officials staged a demonstration demanding that MD Omar Faruq Khan should not resign. At the same time, they demanded resignation of the chairman. As a result, the board meeting was cancelled. In such a situation, many don't consider the chairman and MD's resignation on the same day as 'normal administartive change.'

Speakers at the human chain demanded swift and effective measures to maintain public trust in Islami Bank. At the same time, they urged the relevant authorities to ensure the security of customers' funds.

According to sources  concerned, Islami Bank had long been at the center of political and business influence. Following the political transition in 2024, during the interim government's tenure, former central bank governor Ahsan H. Mansur intervened to restructure the board and appoint independent directors. However, questions have been raised regarding how effective that restructured framework actually was.

According to them, when the chairman and MD of a large bank step down simultaneously, it usually indicates policy conflicts, questions over control, or powerful group pressure. Particularly in a high-deposit institution like Islami Bank, a leadership vacuum can impact depositors' confidence.

Currently, the financial condition of Islami Bank is a major source of concern. The bank's non-performing loan (NPL) ratio has increased significantly, and a massive amount of loans is at risk. Foreign shareholding has also declined. Under these circumstances, the central bank intends to maintain strict oversight. However, if an internal faction of the bank attempts to reduce central bank control in the name of autonomy, it could create new uncertainties in the banking sector.

According to economists, the most critical factor in the banking sector is trust. Since Islami Bank is the country's largest Shariah-based bank, any instability here could impact the entire Islamic banking sector. Consequently, transparency, accountability, and effective oversight by the central bank in appointing the new chairman and MD are now the most crucial issues.

Asked about the crisis at Islami Bank, spokesperson Arif Hossain Khan said that Islami Bank is the largest bank in the country. Bangladesh Bank will not allow any kind of crisis to develop in this bank. The current chairman of the bank has submitted a resignation letter. Bangladesh Bank has accepted it and appointed a new chairman. The Banking Regulation and Policy Department of Bangladesh Bank has also issued a circular regarding this. It states that by virtue of the powers conferred under Section 45 and Section 47 (3) of the Bank Company Act, 1991, Md. Khurshid Alam has been appointed as an independent director and chairman of the board of directors of Islami Bank.

END/ASA

Companies and organisations will be required to file tax returns on the income generated by employee welfare funds from the current fiscal year and pay a 27.5 percent tax on the earnings. 

The Income Tax Act 2023 incorporates the provision, lifting the tax exemption and amnesty on the compulsion to file returns for funds such as provident funds, gratuity funds and workers' profit participation funds maintained by the private sector.

The law, however, has exempted government-managed provident funds from taxation, raising questions.

TIM Nurul Kabir, executive director of the Foreign Investors' Chamber of Commerce & Industry, said there were many other avenues to collect tax.

"Employees benefit from provident funds after their retirement. So, the authority should not slap taxes on retirement benefit."

He said while levying the tax, the government has not treated provident funds of the private and public sectors equally.

"It is discriminatory," he said, adding that they would appeal to the tax authority for the withdrawal of the tax on income from provident funds.

Debabrata Roy Chowdhury, director for legal, regulatory and corporate affairs at Nestlé Bangladesh PLC, said the introduction of income tax on trust funds would lower the overall income from such schemes.

"This will have an adverse long-term impact on retired employees of private organisations."

Chowdhury urged the authority to address the issue in line with the spirit of the government's initiatives aimed at ensuring social security for private sector employees.

"The recent introduction of the universal pension scheme for private sector employees is a good example of that."

A senior official of the NBR, on condition of anonymity, said the income of government-managed provident funds was exempted in line with the Provident Fund Act 1925.

He said provident funds under the private sector had been historically exempted and there was no requirement to submit tax returns. As a result, it was unclear whether the funds were properly utilised.

"From now onwards, we will see proper disclosure."

The tax official said the contribution of payroll tax is about 3 percent of the total income tax although it should increase as the economy is growing.

Md Shahadat Hossain, a former president of the Institute of Chartered Accountants of Bangladesh, said income from investment in savings certificates, where people invest as a source of future earnings, is already taxed.

"From that perspective, the imposition of tax on provident and other employee welfare funds seems okay."

However, Towfiqul Islam Khan, senior research fellow at the Centre for Policy Dialogue, said social protection for private sector employees was low.

"Provident and other workers' welfare-related funds provide little social protection. The imposition of tax will increase inequality. But there can't be any discrimination in taxation between private and government provident funds."

Khan, citing the latest income tax law that replaced the Income Tax Ordinance 1984, said the NBR tried to find new avenues to increase tax collection and improve the nation's revenue-gross domestic product ratio, which is one of the lowest in the world.

"We can see the desperation of the tax authority to boost collection. This ultimately reveals the inability of the NBR to catch the tax evaders and illicit money makers."