Excess liquidity in Islamic banks surged by Tk 9,272 crore in December compared to September 2024, mainly due to the Bangladesh Bank鈥檚 massive bailout to crisis-hit shariah-based banks.
According to a Bangladesh Bank report titled Quarterly Report on Islamic Banking in Bangladesh, excess liquidity in Islamic banks jumped to Tk 9,435 crore at the end of December, a sharp rise from just Tk 163 crore in September 2024.
Central bank officials attributed the surge to the Tk 24,000 crore financial support provided to six Islamic banks between October and December.
Excess liquidity refers to the liquid assets banks hold beyond what is required for daily operations and regulatory obligations.
Excess liquidity in Shariah-based banks had plummeted to Tk聽163 crore in September due to multiple factors, including exposure to major financial scams, fund mismanagement, board restructuring, and a surge in deposit withdrawal requests as confidence eroded.
These issues led to a liquidity crunch, with depositors rushing to withdraw their funds, further straining the banks鈥� financial health.
Bangladesh has 10 fully-fledged Islamic banks.
Among them, only Shahjalal Islami Bank and Al-Arafah Islami Bank had significantly increased their excess liquidity, while the others had continued facing financial stress.
Liquidity issues in these banks began in November 2022 following media reports on large-scale loan irregularities, particularly in Islami Bank, which triggered panic-driven deposit withdrawals.
However, the situation improved in December after the central bank stepped in, reassuring depositors that their money would be safe, even in the event of a bank collapse.
As a result, the excess liquidity of all Islamic banks, except Social Islami Bank and ICB Islamic Bank, turned positive by December.
With the bailout, the total deposits in the Islamic banking system saw a modest increase, rising by Tk 3,091 crore (0.71 per cent) to reach Tk 4,39,758 crore in December 2024, up from Tk 4,36,667 crore in September.
On the other hand, total investments (loans and advances) in the Islamic banking system increased by Tk 8,867 crore, reaching Tk 4,79,310 crore by the end of December 2024.
The central bank鈥檚 intervention also boosted the overall excess liquidity in the banking sector, which rose to Tk 2.14 lakh crore in December 2024, up from Tk 1.9 lakh crore in September. Deposits in the entire banking system also increased significantly, reaching Tk 17,76,752 crore in December 2024, compared to Tk 16,53,744 crore in December 2023.