Liquidity crisis has turned severe in the Social Islami Bank Ltd (SIBL), preventing the bank from maintaining the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) as per Bangladesh Bank regulations. Fines issued by the regulator are mounting day by day.
Besides, SIBL’s current account maintained with the central bank for settlement of inter-bank transactions has turned negative. The bank is even struggling to run day-to-day operations without regulator support.
In this backdrop, the bank has recently applied for a special liquidity support of Tk 850 crore from the Bangladesh Bank to tackle the ongoing crisis.
On November 30 this year, the bank’s Managing Director Zafar Alam had sent a letter in this regard to the central bank Governor Abdur Rouf Talukder. This letter highlighted the crisis of SIBL triggered by a liquidity crunch.
Bangladesh Bank and SIBL sources have confirmed the matter. This report was prepared by Ziadul Islam of Daily Amader Shomoy, an associate organization of The Business Post.
About the letter, Bangladesh Bank Executive Director and also the spokesperson Md Mezbaul Haque told the reporter, “We have received an application from SIBL. This application is being scrutinised by the concerned department of the central bank.
“SIBL sought the support against the bank’s confirm receivables from various sectors of the government.”
When contacted, SIBL Managing Director Zafar Alam said, “There are call money, repo and special repo available as support for conventional banks. But there is no such support for Islamic banks. We cannot accept such support due to procedural reasons.
“Under such circumstances, we submitted an application to the central bank for assistance. We have also informed the central bank that our liquidity situation is improving, and we no longer need the support.”
In response to the question of when it was informed to the central bank, Zafar Alam replied, a few days after sending the letter. “We verbally told the Bangladesh Bank that we no longer need this facility. As a result the application needs not to process.”
According to sources, SIBL has been failing to maintain the CRR and SLR since December last year due to liquidity shortage. Because of this, the bank is being fined regularly. So far this year, the bank has been fined around Tk 50 cr.
According to a Bangladesh Bank report, SIBL's liquidity shortage was Tk 809 crore in December last year, which rose to Tk 1,059 crore in September this year.
Sources say that SIBL has given loans to various institutions of dubious identities, which have made recovery near impossible. Because of this, the bank's liquidity crisis has increased. The loan irregularities came up in various inspection reports of the Bangladesh Bank.
Besides, there are allegations against the bank that it showed a lower amount of defaulted loans instead of the actual figure.
According to a report of the Bangladesh Bank, the total disbursed loan amount of SIBL at the end of September 2023 was Tk 35,177 crore. Of this figure, Tk 1,680 crore turned into defaults, of which 93.54 per cent or Tk 1,570 crore is bad loan.
Bad loans are extremely difficult to recover.
