Five Islamic banks warned over liquidity shortage: BB

The Bangladesh Bank (BB) has warned five Islamic banks experiencing liquidity issues, instructing them to address the negative balances in their current accounts within 20 working days. 

Md Mezbaul Haque, spokesperson for Bangladesh Bank, at a press conference on Sunday confirmed that the central bank dispatched warning letters to Islamic Bank Bangladesh PLC, Social Islami Bank Limited, Union Bank PLC, First Security Islami Bank PLC, and Global Islami Bank PLC.

He clarified, "They have been sent a warning letter. The warning is not a decision to cancel money payment services." He added that while the central bank's Motijheel office initiated the communication, the final decision rests with the Payment Systems Department.

Liquidity issues have arisen within these banks due to structural problems in Islamic banking, leading to a prompt response from Bangladesh Bank. Mezbaul Haque assured that the central bank is committed to addressing these challenges in the future.

"The main goal of the central bank at this moment is to control inflation. Once we alleviate external pressure, the Bangladesh Bank will shift its focus to the governance of banks facing crises," said Mezbaul Haque.

The Payment Systems Department holds the authority to decide on the continuation of transactions with other banks if the deficit in the current accounts is not addressed within the stipulated 20 working days, as mentioned by the spokesperson. Mezbaul Haque also disclosed that ICB Islamic Bank Limited had previously received Tk700 crore in support. 

The Bangladesh Bank routinely provides assistance to banks with negative current account balances; this is a part of a regular process. However, the warning letters, dated 28 November, clearly instruct the banks to adjust their negative balances promptly.

The letter sent from the Motijheel office of Bangladesh Bank stated, "On reviewing your current account balance, it is observed that the current account balance has been negative for a long time, which is not in line with normal banking procedures. Although the matter has been brought to your attention repeatedly, you have not taken any significant steps so far."

It further advised, "It is hereby advised that you must address the negative balance of your current account within 20 working days of receiving this letter." 

The letter concluded with a stern warning, stating that any failure within the specified time would result in being barred from any clearing platform in accordance with the contract signed with the Payment Systems Department, Bangladesh Bank, for maintaining an adequate amount of funds in the designated account for Clearing Settlement.