Depositors of Sammilito Islami Bank PLC, formed through the merger of five banks, will be able to withdraw the principal amount of their deposits as required from Sept 1, with no haircut on deposits.

The decision was conveyed at a meeting between Bangladesh Bank Governor Md Mostaqur Rahman and Sammilito Islami Bank Chairman Kazi Shairul Hasan and Managing Director Abedur Rahman Sikder on Tuesday, according to a Bangladesh Bank media release.

Deputy Governors Md Habibur Rahman, Md Kabir Ahmed, Md Sarwar Hossain and Md Anisur Rahman were also present at the meeting.

The governor said although the Finance Minister had announced in Parliament that there would be no haircut on depositors’ profits, some confusion remained among depositors.

He instructed the bank to clearly inform all depositors that there would be no haircut on their profits.

Depositors are already being repaid under the scheme announced on Dec 29 last year. From Sept 1, individual depositors will also be able to withdraw the principal amount from Al-Wadiah current accounts, Mudaraba savings accounts and Mudaraba term deposits according to their needs.

Bangladesh Bank instructed Sammilito Islami Bank to take the necessary measures to implement the decision.

On Jan 14 this year, Bangladesh Bank decided to impose a haircut on the profits of depositors of the five banks that were subsequently merged. In letters sent to the administrators of the five banks, the central bank said depositors would not receive profits on their balances for 2024 and 2025.

The decision was taken in line with international practice, resulting in a portion of depositors’ returns being withheld as a haircut. Depositors had protested against the decision from the outset.

With the latest decision, the haircut rule has effectively been withdrawn, allowing individual depositors greater access to their deposits from Sept 1.

According to Bangladesh Bank, Sammilito Islami Bank PLC was formed with capital of around Tk 35,000 crore and is the country’s largest and only state-owned Islamic bank.

The central bank instructed the bank to take necessary steps to restore its operations to normal as quickly as possible.

The latest move is expected to further expand the scope of normal banking transactions for individual depositors from Sept 1.