Shariah banks toughen liquidity deficit burden

Mahfuja Mukul : Banks are required to compulsorily deposit a portion of deposits with the central bank to protect customer deposits or deposits. However, six Shariah-based banks and two conventional banks have not able to deposit the money in the central bank as required. As a result, the current accounts of these banks with the central bank sometimes fall into large deficits. Due to this large deficit of some banks, there is a shortfall in the deposit protection money of the banks deposited with the central bank. At the end of last November, this deficit stood at Tk 5,193 crores. This information was obtained from the December report of the central bank.
According to the size of economy, banks of the country had an obligation to deposit Tk 71,052 crore with the central bank in respect of cash deposits (CRR) last November; But the banks were able to deposit Tk 65,859 crore. Banks that are not in liquidity crisis have deposited more than the required amount due to CRR, but in total the central bank has a shortfall of more than Tk 5000 crore. Basically, some Shariah-based banks are unable to deposit money due to CRR. Banks that are not able to deposit CRR money are paying fine, they are also not able to deposit the fine.
Bangladesh Bank officials say that some banks are in major liquidity crisis. As a result, this crisis is spreading throughout the sector. Due to which the good banks of the country are facing various questions at home and abroad. In particular, the global standards verification organizations have to face many questions.
Banks which have caused this shortfall include Islami Bank Bangladesh, Social Islami Bank, First Security Islami Bank, Global Islami Bank, Union Bank, ICB Islamic Bank, Padma Bank and National Bank. After various irregularities, there has been a change in the management, ownership and management of the traditional Padma Bank and National Bank. However, the central bank has not taken any action regarding the Shariah-based banks.
Association of Bankers Bangladesh (ABB) Chairman and Managing Director of BRAC Bank Salim R.F. Hossain said about this, the lack of CRR of the entire banking sector is not good news. Local customers transact with bank-based enquiries. This may not be a problem in the confidence of the banks. However, foreign credit rating agencies, foreign banks and foreigners will not look favorably on this deficit. They review these indicators and take various decisions. Because of the banks that have caused this situation, surely the central bank is taking steps to get out of that situation.
Why shortage
After various irregularities in Shariah-based banks, the growth of deposits has slowed down. Loan disbursement has not decreased compared to that. As a result, a large part of the deposit is going to the loan. These banks are not able to deposit money according to the demand of the central bank. There is a fine for this; But not paying the fine.
On January 31, Islami Bank was supposed to deposit Tk 6,650 crore under CRR. On that day the current account deficit of the bank was Tk 2,656 crores. As a result, the total deficit stands at Tk 8,321 crores. On the same day, the deficit of First Security Islami Bank was Tk 9,708 crore, Social Islami Bank was Tk 3,482 crore, Union Bank was Tk 2,600 crore and ICB Islamic Bank was Tk 34 crore. Apart from this, the deficit of National Bank was Tk 1,614 crore and Padma Bank Tk 145 crore on the same day.
Bangladesh Bank has restructured the Board of Directors of National Bank last December due to various irregularities. Earlier, the Board of Padma Bank was also dissolved. However, the regulatory agency did not take any action against the various irregularities of the Shariah-based banks. On the contrary, the activities of these banks have been kept active by lending money under special powers. The MDs of Islami Bank, First Security Islami Bank, Social Islami Bank and Global Islami Bank were contacted for their comments but they did not respond.
Ahsan H. Mansoor, executive director of research organization Policy Research Institute (PRI), said, ‘Bangladesh Bank is printing money to sustain these banks without any accountability. No one has been given the power to give money like this. Due to these banks, there has been a huge deficit in the entire banking sector, which has put the banking system in question. Good banks are also in trouble. Thus, not all banks can take responsibility for the crime of small banks. An arrangement should be made for this.’
Other banks also under pressure
Bangladesh Bank publishes a report on the economy every month. According to the data of that report, in December 2022, the banks had an additional Tk 22,371 crore deposited with the central bank. In July last year which decreased to Tk 5,100 crores. Deficits started in the entire banking sector from August. In that month, the deficit was Tk 695 crore. After that, the deficit continued to increase. Last November it increased to Tk 5,193 crores. Other banks are also under pressure.
Syed Mahbubur Rahman, Managing Director (MD) of Mutual Trust Bank said in this regard, ‘Because of such a big deficit in the entire banking sector, wrong messages are being sent to foreigners. It seems that the entire sector is in bad shape. Especially those who are trading partner banks, they are more concerned about this. Either way, this shortfall needs to be addressed urgently. Because the liability of a few banks has fallen on the entire banking sector. The index has deteriorated.