Five Shariah-based banks facing severe cash crisis

Staff Correspondent: Due to shortage of money, financial transaction services of five Shariah-based banks of the country are about to be stopped. By writing to these banks, Bangladesh Bank has said that the current account status of Bangladesh Bank, which has been with the banks for a long time, is negative.
Banks have not taken any significant action despite being repeatedly informed about the matter. Therefore, Bangladesh Bank has fixed a period of 20 days for adjusting the negative balance of current account.
Bangladesh Bank said that if the negative current account balance is not adjusted within 20 days, the banks will be prevented from clearing or settling the system.
The banks which have been given this instruction are Islami Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank and Union Bank. Bangladesh Bank has given this letter to the managing directors of five banks on November 28.
Although the current account status with Bangladesh Bank is negative, Bangladesh Bank is now lending money to these banks regularly. This facility is being provided so that no customer fails to withdraw their deposits. Meanwhile, these five Islamic banks are suffering from liquidity crisis for a year. Despite the increase in deposits in these banks, cash demand deposits (CRR) and statutory deposits (SLR) are not being deposited in the central bank. As a result, regular penalty interest or penalty has to be calculated. Some people are not even paying this fine.
Bangladesh Bank spokesperson Majbaul Haque did not want to say anything directly about this. However, he told that if the central bank gives any letter, then action will be taken accordingly. Banks facing liquidity crisis borrow money from Bangladesh Bank in various ways. Then the central bank can also take action if it fails to deposit liquidity as promised. Islamic banks have structural problems in liquidity management, some banks have been given time till November.
What said in letter
As per rules, every bank in the country has to maintain a current account with Bangladesh Bank’s Motijheel office. Bangladesh Bank settles all transactions from this account. Besides, CRR money is also there as such.
Bangladesh Bank’s letter to five banks states, ‘Settlement of various transactions through your current account kept in the deposit account section of Motijheel office, such as check clearing services (BACPS), online money transfer (BEFTN), receiving services from other banks through ATM and internet services. NPSB and Instant Money Transfer (RTGS) service transactions are completed. A review of your current account balance shows that the current account balance has been negative for a long time, which is not consistent with normal banking practice.
The letter further states that within 20 working days of the receipt of the letter, advice is given to adjust the negative balance of the current account. Banks will be prevented from all or any specific settlement system in accordance with the agreement of ‘preserving sufficient amount of money as determined for settlement of transactions’ executed with the payment system department of Bangladesh Bank in case of failure to reconcile the money within the stipulated time. That is, the central bank has threatened to stop the check clearing, ATM and online banking services of these five banks. It is learned that five banks have not adjusted the negative status of these accounts till last Wednesday.
Islami Bank Managing Director (MD) Muhammad Munirul Mawla was contacted on the phone but he did not pick up the phone.
Apart from Islami Bank, the MDs of four other banks were also contacted to find out about this. But none of them picked up the phone.
According to Bangladesh Bank rules, Shariah-based banks are required to maintain 4 percent of their deposits as current account as CRR. Basically, to protect the interest of the depositors, under this provision, a certain amount of money has to be deposited against the deposit in Bangladesh Bank. None of the mentioned five banks are able to maintain CRR at fixed rate.