Four more Islamic banks get Tk6,790cr fund from BB

Four more Shariah-based banks have availed of special liquidity support from Bangladesh Bank (BB) as they have failed to maintain adequate cash reserve ratio (CRR) following excessive deposit withdrawals by clients.

Following requests, the central bank provided Tk 6,790 crore overnight OD (Overdraft) facility to Social Islami Bank Ltd (SIBL), First Security Islami Bank Ltd (FSIBL), Global Islami Bank Ltd (GIBL) and Union Bank Ltd (UBL) at a special repo rate of 8.75 per cent under special consideration.

These crisis-hit lenders took support from the banking regulator on December 29, the last working day before the end of 2022, sources said.

However, a Shariah-based bank is not supposed to borrow by offering interest. Reached for comment, BB Executive Director and spokesperson Mezbaul Haque told the Business Post, “We have provided these facilities as we have no specific instrument for these Islamic lenders to save them.”

He said this facility is called “lender’s last resort” because it allows banks to borrow from the central bank. These four banks provided an equivalent amount of demand promissory note to BB against the overnight OD facility.

CRR is a portion of the bank’s deposits that it must keep in liquid cash with BB to protect depositors’ interest, as per the central bank’s rules.

FSIBL took the highest Tk 3,125 crore after it failed to maintain the CRR with the central bank in 34 days of November and December of the just-concluded year. Its CRR shortfall was Tk 1,508 crore on December 28.

SIBL took Tk 1,500 crore as the bank failed to maintain the CRR with BB in 30 days of November and December. Its CRR shortfall stood at Tk 899 crore on December 28.

UBL took Tk 1,465 crore after it failed to maintain the CRR with the central bank in 18 days of November and December. Its CRR shortfall was at Tk 526 crore on December 28.

GIBL took Tk 700 crore as the lender failed to maintain the CRR with BB in seven days of December. Its CRR shortfall stood at Tk 107 crore on December 28.

Earlier, Islami Bank Bangladesh Ltd (IBBL) alone had taken Tk 8,000 crore from the central bank under the overnight OD facility, drawing much criticism from various quarters.

S Alam Group, a Chattogram-based business conglomerate, is the majority shareholder in all five Islamic banks.

Before taking the support under the overnight OD facility, these five banks also took Tk 5,250 crore liquidity support from BB under the Sukuk bond facility last month. Recently, these Islamic banks have faced huge deposit withdrawal pressure over huge loan irregularities.

IBBL became mired in controversy after some leaked documents and media reports alleged that the bank approved Tk 9,135 crore in loans to 11 ghost and obscure companies.