Islamic banks’ deposit declines Tk427cr in Q1

The deposit volume in the country’s Islamic banks has decreased by Tk 427 crore in the first quarter of this year compared to the previous quarter.

On the other hand, loan disbursements have increased abnormally compared to deposits.

During January-March of 2023, the deposits of full-fledged Islamic banks were Tk 3,79,524 crore. The amount is 0.11 per cent, or Tk 427 crore, less than the previous quarter. The amount of deposit during October-December of 2022 was Tk 3,79,951 crore.

However, in January-March quarter of 2023, deposit in the Islamic banks increased by 1.38 per cent compared to the same quarter of last year, according to the central bank’s quarterly report on Islamic banking in Bangladesh.

Asked about the decrease in deposits, former director general of Bangladesh Institute of Bank Management Toufic Ahmad Choudhury told The Business Post, “Last year, the news of some Islamic banks’ loan scams came out which has shaken the confidence of the depositors.”

“Even though they are Islamic, now they are not able to establish faith. Also some rumors spread in the market. Due to these effects, deposits have decreased,” he continued.

Notable, at least five Islamic banks disbursed aggressive loans last year. As a result, the banks fell into liquidity crisis. Aggressive loan disbursement growth is still continuing.

Loan disbursements of Islamic banks increased by 1.18 per cent in the first quarter of this year compared to previous quarter. And it increased by 13.45 per cent year on year. At the end of March this year, total disbursed loan amount was Tk 3,88,101 crore.

Full-fledged Islamic banks are facing a liquidity crisis due to the increase in loans over deposits and poor recovery of defaulted loans. The liquidity shortfall of these banks was Tk 6,244 crore in January-March compared to previous quarter and Tk 23,148 crore when compared year on year.

Meanwhile, deposits in full-fledged Islamic banks have decreased, but deposits in Islamic branches and wings of conventional banks have increased. compared to previous quarter, deposits of Islamic branches of conventional banks increased by about 11 per cent, to Tk 15,380 crore, in January-March of 2023. On the other hand, the amount of conventional bank’s windows has increased by almost 4 per cent to Tk 16,727 crore in the first quarter of this year, compared to previous quarter.

In this context, Toufic Ahmad said, “The deposits lost in Islamic banks are entering these types of banks. Own savings are more important to depositors. It does not matter whether the bank is Islamic or conventional one. Savers want to keep their money in banks which are good in governance.”

IBBL’s situation

Total deposits of the 10 full-fledged Islamic banks accounted for 92.20 per cent of deposits of the Islamic banking system. Among all Islamic banks, Islami Bank Bangladesh Limited (IBBL) received the highest amount of 34.29 per cent deposits. However in the same quarter of last year, the share was 35.26 per cent.

This share has reduced due to a massive decline in the bank’s deposits. According to the cash flow statement of the bank, deposits in the bank in first quarter (January-March) of 2021 were Tk 4,672 crore.

In the same period of 2022, the amount decreased to Tk 2,956 crore. And in the first quarter of this year, only Tk 309 crore has been deposited to the bank.