Five Islamic banks borrow Tk4,000cr from BB in a day

Just a day after the central bank announced liquidity facility for the country’s Islamic banks, five shariah-based banks borrowed Tk 4,000 crore from the Bangladesh Bank on Tuesday to meet their liquidity shortage.

Amid the crisis in Islamic banks, Bangladesh Bank introduced “Islamic Banks Liquidity Facility (IBLF)” to provide fund supports on Monday.

Bangladesh Bank Executive Director and Spokesperson Mezbaul Haque said five shariah-based banks took the liquidity support of Tk 4,000 crore against Sukuk.

At present, 10 Islamic banks are in operation in the country, which are Islami Bank Bangladesh, ICB Islamic Bank, Social Islami Bank, Al-Arafah Islami Bank, Exim Bank, Shahjalal Islami Bank, First Security Islami Bank, Global Islami Bank, Standard and Union Bank.

At least six banks including Islami Bank Bangladesh, ICB Islamic Bank and Social Islami Bank are facing a huge liquidity shortage, as per industry insiders.

The growing import payment after the Covid-19 pandemic and the recent loan irregularities were the reasons behind the liquidity shortage in Islamic banks.

BB officials said that Islamic banks had no liquidity shortfall previously, but now those lenders are also facing liquidity shortage along with conventional banks.

A chief executive of a private commercial bank, seeking anonymity, said an increasing number of depositors are now withdrawing their money from the banks due to rumors on social media.

At the end of October this year, excess liquidity in the country’s banking sector stood at Tk 1,69,586 crore, down from Tk 2,11,506 crore in January of this year, as per the latest data from the Bangladesh Bank.

The US dollar selling spree by the central bank impacted on the banks’ liquidity as the banking regulator sold $6 billion to banks and withdrew the equivalent amount of local currency from the banks.

The central bank had injected a record $7.62 billion from its reserve into banks in the last financial year.

Policy for Islamic Banks Liquidity Facility

Amid the crisis in the banking sector in Bangladesh, the central bank introduced a policy on Monday to provide liquidity facilities to shariah-compliant banks.

With an aim to strengthen the financial management of Islamic banks, the central bank issued a guideline, titled “Islamic Banks Liquidity Facility (IBLF)”.

According to the guideline, the tenure of the liquidity support will be 14 days and the shariah-based lenders can apply to the central bank for the support during working days.

The central bank guideline comes at a time when the banking sector is facing liquidity shortage.

The BB guideline said that Shariah-based banks maintaining current accounts with Bangladesh Bank (BB) are eligible for the IBLF.

The banking regulator will provide the liquidity facility under the Mudarabah contract where Bangladesh Bank acts as the investor and banks act as the investment manager under an agreed Profit Sharing Ratio (PSR). The 14 days tenure IBLF profit rate would be equal to three months’ Mudaraba Term Deposit Receipt (MTDR) of respective banks.

Islamic lenders can apply for IBLF on every working day through the prescribed form of the central bank to Securities Section of Motijheel Office within stipulated time set by Bangladesh Bank, as per the BB guideline.

It said that the IBLF will be provided according to the decision of the Auction Committee of BB.