Deposit growth strong in Islamic windows, weak in full-fledged Islamic banks

Total deposits in conventional Islamic banking increased by 41 per cent to about Tk 66,000 crore up to October in the current fiscal year, while deposits in fully Islamic banks grew by less than 4 per cent.

Similarly, overall, Sharia-based loans or investments of conventional banks have increased at a higher rate than those of Islamic banks. The picture reveals in last October report of Bangladesh Bank on Islamic banking.

Due to uncertainty to return depositors money the Islamic Sharia-based Exim Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank and Union Bank, operated on Islamic law, were merged to newly created Sammilito Islami Bank. 

As a result, the number of fully Islamic banks has decreased from 10 to 6. And the total number of banks has decreased to 57.
There are 1,699 branches of fully Islamic banks in the country. Among them, the merged Islamic Banks have 761 branches. 

Although the banks are merged, no branch will be closed for the time being. However, where there are multiple branches in the same area, they will be transferred from there to another place.

Outside the full Islamic banks, there are 41 Islamic banking branches and 334 windows of 17 conventional banks. Apart from these, there are 585 Islamic banking windows of 12 conventional banks, says Bangladesh Bank data. 

The deposits in conventional Islamic banks have increased by 41.47 per cent to Tk 65,956 crore. A year ago, their deposits were Tk 46,622 crore. During this time, the deposits of fully Islamic banks increased by only 3.92 per cent to Tk 4,01,473 crore. 

In total, deposits in Islamic banking increased by 7.79 per cent to Tk 4,67,429 crore in October. In the year till last October, the total deposits of the banking sector increased by 10.49 per cent to Tk 2,071,070 crore. And the share of Islamic banking in total deposits decreased to 22.57 per cent. 

At the end of October last year, Islamic banking had Tk 4,32,937 crore of total deposits of the banking sector of Tk 18,74,388 crore; which was 23.10 per cent of the total deposits.

According to the Bangladesh Bank, the investment or loan of full-fledged Islamic banks increased by 11.27 per cent to Tk 5,76,864 crore in a year till last October. Of this, conventional Islamic banking loan increased by 35.24 per cent to Tk 51,031 crore. Basically, a large part of the loans of banks that are in bad condition have defaulted and there is no recovery. That is why the overall loans of these banks are not decreasing much.

Bangladesh Bank Spokesperson and Executive Director Arif Hossain Khan said that due to the extreme deterioration in the financial condition of several banks, their deposits have been continuously decreasing since 2022. However, confidence has started to return somewhat in the last few months. That is why overall, the deposits of full-fledged Islamic banks have increased slightly. Although their share in total deposits has decreased.

Apart from this, people have not been able to withdraw any money from the banks that are being merged for a long time. That is why deposits are not decreasing as before. 

After information about frauds by some Islamic banks under state sponsorship came to light, many people started withdrawing their deposits in panic. In June 2022, the deposits of Islamic banks were Tk 4,01,302 crore. 

The total deposits in the banking sector were Tk 16,24,477 crore, which was 24.70 per cent.
An official of Bangladesh Bank said even after maintaining statutory liquidity until the takeover of Islami Bank Bangladesh Limited in 2017, Islamic banks had a lot of surplus money in their hands. 

At that time, it used to be that these banks sometimes had as much as 80 per cent of the total surplus funds. This was because Islamic banks could not invest in conventional bills and bonds.