Liquidity hardship haunts once-affluent Islamic banks in Bangladesh principally for directed lending of king's ransom apart from adversities in global ill time, sources say.
According to Bangladesh Bank's latest report, the excess liquidity of the country's Islamic banking system dropped significantly during the April-June 2023 period on a year-on-year basis.
The report, released Thursday, says the liquidity in hand stood at Tk 86.90 billion at the end of June 2023 in a precipitous fall by 66.59 per cent from the mark in the same quarter a year before.
Excess liquidity is calculated after maintaining the requisite statutory liquidity ratio (SLR) and cash reserve ratio (CRR) as per banking regulations. Islamic banks have to maintain 4.0-percent CRR and 5.5- percent SLR with the regulator.
But the excess liquidity is higher by Tk 9.82 billion or 12.75 per cent as compared to the end of March, according to the quarterly report on 'Islamic Banking in Bangladesh'.
The liquidity at the end of June with full-fledged Islamic banks, Islamic-banking branches and windows of conventional banks stood at Tk 24.93 billion, Tk 21.59 billion and Tk 40.38 billion respectively.
The Shariah-compliant banks have been facing liquidity shortages after a few scams or loan irregularities with some Islamic banks in 2022 which led to mass panic withdrawals of deposits.
However, the stress still stays as the banks borrow from the central bank through Islamic bonds to meet obligations. The central bank is believed to be the last resort of lender.
An FE calculation on the past two-month borrowings by Islamic banks from the central bank shows Tk 260 billion raised through Islamic bonds. In August last, they borrowed Tk 162.66 billion, and in July Tk 97.52 billion.
On the other side of the account, the total remittances mobilised by the Islamic banks decreased by Tk 84.17 billion or 27.50 per cent to Tk 221.92 billion during the April-June quarter from Tk 306.09 billion in January-March 2023.
Total deposits with Islamic banking reached Tk 4280.00 billion at the end of last June with an increase of Tk 163.69 billion or 3.98 per cent as compared to the end of March 2023.
It was also higher by Tk 156.59 billion or 3.80 per cent as compared to the same quarter of the past year.
Total 'investment' (loans and advances in conventional banking) in Islamic banking system stood at Tk 4214.77 billion, higher by 2.2 per cent from the previous quarter.
The investment-deposit ratio of the Islamic banks decreased to 0.91 (excluding EDF and refinance) from 0.92 of end March 2023.
At present, the Islamic-banking system represents more than 25-percent share of deposits and 29-percent share of investments of the total banking sector.
At the end of June 2023, there were full-fledged Islamic banks in Bangladesh operating with 1671 branches while there were a total of 11,177 branches in the whole banking system.
Additionally, 23 Islamic-banking branches of 11 conventional commercial banks and 588 Islamic- banking windows of 14 conventional commercial banks are also providing Islamic financial services in Bangladesh.
jasimharoon@yahoo.com
