Four Shariah-based banks — Social Islami Bank Ltd (SIBL), First Security Islami Bank Ltd (FSIBL), Union Bank Ltd (UBL) and Global Islami Bank (GIB) — have been in liquidity shortage since June, the last month of FY2022-23.
At the same time, Islami Bank Bangladesh Ltd’s (IBBL), the country’s largest Shariah-based bank, liquidity also drastically fell in FY23, compared to FY2021-22, but it narrowly escaped being in shortage.
Excess liquidity of 10 full-fledged Islamic banks drooped by over 88 per cent in FY23, compared to FY22, due to slow growth of deposits, high growth of lending and non-performing loans (NPL), according to a report of Bangladesh Bank (BB).
At the end of June, excess liquidity in these banks dropped to Tk 2,493 crore from Tk 21,009 crore in FY22. In FY21, excess liquidity was Tk 31,655 crore, which was the highest ever for the Islamic banking sector.
BB revealed the information in the “Quarterly Report on Islamic Banking in Bangladesh” released on Thursday.
According to the report, SIBL’s liquidity shortage in June was Tk 1,106 crore. In June FY22, the bank had an excess liquidity of Tk 1,292 crore.
FSIBL’s liquidity shortage was Tk 918 crore in June. The bank had an excess liquidity of Tk 2,488 crore in the same month of FY22.
At the end of June, UBL’s liquidity shortage was Tk 467 crore. In comparison, it had Tk 272 crore in surplus in June of FY22.
The liquidity shortage of GIB, which was converted to a Shariah-based bank in 2021, was Tk 419 crore in June. It had Tk 102 crore in excess liquidity in June FY22, said the BB report.
Meanwhile, IBBL’s excess liquidity was at Tk 11,174 crore in June of FY22, and it faced a liquidity shortage of Tk 1,079 crore in March of FY23.
However, at the end of June FY23, IBBL managed to turn around and had an excess liquidity of Tk 119 crore.
The Business Post tried to reach senior officials of these five banks over the phone for comments on the matter, but no one was available.
Sector analysts have said that the overall growth of deposits in the country’s banking sector declined in FY23 and these Islamic banks lent aggressively in FY22. On top of that, provision against NPLs has risen more than before due to rising NPLs. As a result, these Islamic banks are in liquidity shortages now.
Talking to The Business Post on condition of anonymity, a researcher at Bangladesh Institute of Bank Management said that Islamic banks’ portfolios worsened due to aggressive lending to a large group. Also, BB penalised them for failing to maintain the statutory liquidity ratio.
However, the situation of the banks is still not too bad due to the liquidity support from BB. But these banks’ reputations are in crisis as a result of some reports in mass media, which caused a crisis of confidence and that is why customers are still withdrawing their deposits from them. All these reasons are why these five banks are in liquidity shortage, said the researcher.
According to the BB report, 10 full-fledged Islamic banks’ deposit and lending growths were 10.93 per cent and 15.32 per cent, respectively, in June of FY22.
In June FY23, their deposit growth declined to only 2.13 per cent and lending growth was at 9.63 per cent.
According to the central bank report, at the end of June FY23, 10 full-fledged Islamic banks with 1,671 branches were operating in Bangladesh, while there were a total of 11,177 branches of different banks in the whole banking system.
In addition, 23 Islamic banking branches of 11 conventional banks and 588 Islamic banking windows of 14 conventional banks are also providing Islamic financial services around the country.
