In the first crackdown on an extremist Islamic outfit by the Khaleda Zia government, Bangladesh has banned the newly-formed Shahadat-e-Al-Hikma, a group funded by underworld don Dawood Ibrahim.

"After observing activities of Al-Hikma, it was found to be threat to peace and security of the country and that's why the decision has been taken to ban it," Bangladesh Home Minister Altaf Hussain Chowdhury told Parliament.

Kawsar Hossain Siddique, convenor of Al-Hikma, while launching the outfit on February eight, had said it was financed by Dawood Ibrahim, who heads the list of most-wanted terrorists in India and is the prime accused in the 1993 Mumbai blasts case.

Describing, Al-Hikma as "a political party", Siddique had claimed the outfit had 10,000 commandos and 25,000 fighters working in the country to bring an Islamic revolution. Siddique has gone in hiding since then, media reports said.

Siddique alleged that a prominent member of Begum Zia's Cabinet, Barrister Moudud Ahmed, who is the minister for law, justice and parliamentary affairs had helped Al-Hikma, vernacular daily Bhorer Kagoj reported.

Ahmed is yet to comment on the allegation made by Siddique.

"The government is determined to bring to book those who are out to destabilise the administration and defame the country abroad," the home minister said.

The opposition welcomed the move saying the government had admitted to the presence of terrorist elements in the country.

In the last four years 100 people have been killed and 500 hurt in ten major blasts that have rocked the country.

The fundamentalist Jamaat-e-Islami is an important partner in the Bangladesh Nationalist Party-led coalition government.