Islamic Bank Bangladesh Ltd has repaid Tk1,508 crore in loans to the Bangladesh Bank over June and July, following an improvement in deposit growth and a gradual restoration of customer confidence.
The central bank had earlier provided Tk2,308 crore in emergency demand loans to the bank after it failed to maintain the mandatory Cash Reserve Ratio (CRR), due to irregularities in loan disbursement under fictitious or proxy names during the previous government’s tenure.
Of the total loan, Islami Bank repaid Tk808 crore in June and another Tk700 crore on 31 July. With this, around Tk800 crore of the loan remains outstanding.
The Cash Reserve Ratio (CRR) is the portion of a bank’s customer deposits that it must keep with the central bank instead of lending out. In Bangladesh, both conventional and Shariah-based banks are currently required to maintain a CRR of 4%.
Confirming the repaid amount, Islami Bank’s newly appointed Managing Director Omar Faruk Khan told TBS, “After the government change last August, our bank’s CRR had a negative balance of Tk2,308 crore. To cover this shortfall, the Bangladesh Bank provided us with the full amount as a demand loan. We’ve since managed to repay over Tk1,500 crore.”
When asked how Islami Bank managed to overcome the crisis, while many other banks are still struggling, he said, “Deposits are flowing in, and our growth has been strong. In the past seven months alone, we’ve achieved net deposit growth of around Tk14,000 crore. Customer confidence in the bank has significantly improved. As a result, we are now able to maintain both the CRR and the Statutory Liquidity Ratio (SLR) as per the central bank’s requirements.”
Expressing optimism about repaying the full loan by September, the banker added, “Over the past year, governance, public confidence, and several other indicators in the banking sector have improved. Based on that, we expect deposit growth to remain strong in the coming months.”
A senior Bangladesh Bank official also confirmed that Islami Bank is making a turnaround, and its current liquidity situation is significantly better than before.
Over the past year, there have been major changes in the bank’s management. In April this year, former managing director Muhammed Monirul Moula was sent on mandatory leave and later removed over allegations of irregularities and corruption.
In July, the bank’s Chairman, Obaid Ullah Al Masud, resigned, submitting his resignation to the board of directors.
Just last week, Md Omar Faruk Khan was appointed as the new managing director of Islami Bank Bangladesh, while Zubaidur Rahman was made the new chairman.
Back in 2017, Chattogram-based S Alam Group took control of the bank’s board. In the years that followed, huge sums of loans were issued to the business group under false or anonymous names. These practices weakened the financial strength of what was once the country’s most stable bank.
After Ahsan H Mansur assumed the role of governor of the Bangladesh Bank in August last year, he dissolved the existing board of Islami Bank and formed a new one, effectively removing S Alam’s control over the institution.
Mansur has repeatedly told journalists that S Alam siphoned off thousands of billions of taka from Islami Bank and other Shariah-based banks where it had board-level control.
