Deposits drop in Islamic banks, but loans surge

Deposits drop in Islamic banks, but loans surge

DhakaTribune: Loan disbursements in Shariah-based banks significantly increased despite a sharp drop 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 Tk10,866 crore, while their deposits decreased by Tk5,385 crore in December 2023 and January 2024.

In January alone, deposits in these banks declined by Tk8,832 crore, reaching Tk375,304 crore, while loan disbursements increased by Tk3,642 crore, reaching Tk449,073 crore.

In December 2023, deposits slightly increased by Tk3,447 core while loan disbursement soared by Tk7,224 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 Tk14,224 crore in their current accounts with the central bank 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.

Depositors lost their confidence after various news reports about various loan irregularities in some of the Islamic banks.

Market share of Shariah-based banks in overall deposits in the country’s banking system dropped to 23.56% at the end of January 2024 from 23.86% in December 2023.

The Bangladesh Bank on December 5, 2023 issued a 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% in January from 24.81% a month ago.

Of the total deposits, full-fledged Islamic banks held Tk375,304 crore, Islamic banking branches of conventional banks held Tk23,270 crore and Islamic banking branches of conventional banks held the remaining Tk15,394 crore.


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