Deposits at Islamic banks fall by nearly Tk11,500cr in Dec quarter 

The country's Shariah-based banks witnessed a fall in overall deposits, liquidity and export and import activities in the December quarter of 2022 compared to that of the previous quarter, according to the latest report of the central bank.

The banks, however, saw a rise in investment and remittance influx during the period. 

The total deposits of the banks fell by Tk11,426 crore to Tk4.1 lakh crore at the end of December 2022. However, it was 4.28% higher in comparison with that of the same quarter of the previous year, the report said.

The share of total deposits of Islamic banks accounted for 25.81% of total deposits of the entire banking sector during the period, which was 28.43% in the previous quarter, it added.

The liquidity of the banks reached Tk12,871 crore in the December quarter, down Tk4,654 crore from the September quarter. Of the lenders, First Security Islami Bank faced the highest fall; Its liquidity came down to Tk376 crore only from Tk2,877 crore. Islami Bank Bangladesh, Exim Bank and Shahjalal Islam Bank also saw large-scale liquidity falls. 

Liquidity of ICB Islami Bank, Social Islami Bank, Al-Arafah Bank, Union Bank, Standard Bank and Global Islami Bank, on the other hand, increased quarter-on-quarter.

Talking to The Business Standard, several senior bankers said some Shariah-based banks are in a liquidity crisis due to irregularities in lending. The upward trend of buying dollars in exchange for taka to pay import bills, and negative news in the media also contributed to the crisis.

Meanwhile, the Bangladesh Bank has been providing Islamic banks with liquidity support with several programmes such as the 14-day "Islamic Banks Liquidity Facility" and "Mudarabah Liquidity Support" against Sukuk bonds. 

The Bangladesh Bank report also says export-import through Islamic banking channels reduced in the three-month period. The import was worth Tk34,000 crore in the December quarter through the channels – a fall of 42.57% quarter-on-quarter.

Total investment of Islamic banking stood at Tk4.05 lakh crore at the end of December 2022 which went up by Tk19,000 crore or 4.91% as compared to the end of September last year, according to the central bank data, while remittance influx through the banks increased 27% in the December quarter.

Zafar Alam, managing director and chief executive officer of Social Islami Bank, said, "We are among the top 10 banks in the country in terms of receiving remittances, which proves that there is no lack of trust in our bank."

Mentioning that deposits are now on the rise at their bank, he told The Business Standard that their deposits decreased a bit recently owing to negative publicity.

"Situation is improving now. The central bank is also supporting us. Overall, we are better now than before."

The Bangladesh Bank report suggested that Islamic banks should invest more in socially beneficial industries, particularly in agriculture and small businesses. "The investments made by Islamic banks in ideal Islamic modes like Mudaraba and Musharaka are still at a minimal level. Given this, Islamic banks should pay more attention to developing proper guidelines and policies to promote investments under Mudaraba and Musharaka modes," it added.