A file photo shows a man counting taka notes in the capital Dhaka. Loan disbursements from Shariah-based banks have significantly increased despite a sharp decline in deposit collection in December and January. | — New Age photo
Loan disbursements from Shariah-based banks have significantly increased despite a sharp decline in deposit collection in December and January.
According to a Bangladesh Bank report titled ‘Islamic Banking and Finance Statistics,’ loans disbursed by full-fledged Islamic banks surged by Tk 10,866 crore, while their deposits decreased by Tk 5,385 crore in December 2023 and January 2024.In January alone, deposits in these banks declined by Tk 8,832 crore, reaching Tk 3,75,304 crore, while loan disbursements increased by Tk 3,642 crore, reaching Tk 4,49,073 crore.
In December 2023, deposits slightly increased by Tk 3,447 core while loan disbursement soared by Tk 7,224 crore.
There are 10 full-fledged Shariah-based banks operating in the country.
These banks are Islami Bank Bangladesh, Al Arafah Islami Bank, Social Islami Bank, Standard Bank, Exim Bank, First Security Islami bank, Shahjalal Islami Bank, Union Bank, Global Islami Bank and ICB Islamic Bank.
Among them, five banks collectively had a negative balance of nearly Tk 14,224 crore in their current accounts with the BB as on April 24, according to Bangladesh Bank data.
Despite having no money in their current accounts, these banks are still conducting transactions, surviving only with the crucial support or lifeline provided by the central bank.
Ignoring the dire situation, these banks continued lending activities, raising questions of bleak monitoring of the central bank.
Zahid Hussain, former lead economist of the World Bank’s Dhaka office, told New Age that despite the overall growth in deposits in the banking sector, Islamic banks had experienced a decline in deposits, indicating a crisis of confidence among depositors.
Depositors lost their confidence after various news reports about various loan irregularities in some of the Islamic banks
He noted that some Islamic banks had been operating by regularly borrowing from the central bank due to serious liquidity issues.
Hussain criticised the Bangladesh Bank for not taking disciplinary action against the wrongdoing of these banks and for failing to halt their lending activities, which, he argued, has encouraged them to continue malpractices.
Market share of Shariah-based banks in overall deposits in the country’s banking system dropped to 23.56 per cent at the end of January 2024 from 23.86 per cent in December 2023.
Besides, the Bangladesh Bank on December 5, 2023 issued prompt corrective action framework where it announced merging of weak banks with strong banks, which triggered panic in the whole banking sector.
On the other hand, the Islamic banks’ market share in investments, known as loans and advances in traditional banking, has increased to 24.92 per cent in January from 24.81 per cent a month ago.
Of the total deposits, full-fledged Islamic banks held Tk 3,75,304 crore, Islamic banking branches of conventional banks held Tk 23,270 crore and Islamic banking windows of conventional banks held the remaining Tk 15,394 crore.
Now, 33 out of the 60 scheduled banks in the country are offering various Islamic banking services.
