Home ›› 24 Feb 2023 ›› Front
Deposits at full-fledged Islamic banks declined by Tk 11,841 crore (3.02 per cent) in the last quarter of 2022 compared to the previous one.
In the July-September period of 2022, deposits at such banks increased by Tk 9,034 crore to Tk 3,91,792 crore compared to the previous quarter.
However, deposits dropped to Tk 3,79,951 crore in the October-December period, according to a report of the Bangladesh Bank titled “Developments of Islamic Banking System in Bangladesh”, which was released on Thursday.
Analysts said some irregularities at Islamic banks emerged in the media in October and November last year. It was found that aggressive lending by such banks created the irregularities. Panicked depositors then withdrew a large amount of money, causing deposits at these banks to decrease.
Toufic Ahmad Choudhury, former director general of Bangladesh Institute of Bank Management, told The Business Post Islamic banks had lent a very large amount of money violating the rules.
“This created panic among depositors, and they withdrew huge amounts of money. As a result, the banks faced a liquidity crisis. The Bangladesh Bank then gave liquidity support of around Tk 10,000 crore to the Islamic banks,” he said.
Ahsan H Mansur, executive director of Policy Research Institute, said people naturally panic when scandals spread. “Because of that panic, many withdrew their deposits from Islamic banks.”
According to the central bank report, the amount of deposits at Islamic banks decreased in the October-December quarter of 2022 even though their loan disbursements increased.
In that quarter, Islamic banks’ loan disbursements increased by Tk 18,705 crore to Tk 4,05,202 crore compared to the previous one.
But in the July-September quarter, loan disbursements increased by only Tk 3,852 crore to Tk 3,86,221 crore compared to the April-June period.
In this regard, Toufic said the Bangladesh Bank took several steps after the media reported this aggressive lending. “As a result, the situation seems to be improving somewhat this year.”
Both Ahsan and Taufic said it would take a long time for the banking sector to regain the confidence of depositors.
In October and November last year, Islami Bank, First Security Islami Bank, and Social Islami Bank disbursed loans of Tk 6,370 crore to Nabil Group violating banking rules. It was also suspected that the three banks lent a total of Tk 9,500 crore.
After this was revealed in the media, Islamic bank clients rushed to withdraw their deposits, creating a liquidity crisis. For the first time in the history of the country, Islamic banks then sought special liquidity assistance from the Bangladesh Bank.
In the July-September period of 2022, the liquidity position of the full-fledged Islamic banks was Tk 11,310 crore, which dipped to Tk 8,234 crore in the next quarter.
According to the central bank report, at the end of December 2022, there were 10 full-fledged Islamic banks in Bangladesh. In addition, 23 Islamic banking branches of 11 conventional commercial banks and 535 Islamic banking windows of 13 conventional commercial banks were also providing Islamic financial services.
