The country's Islamic banks, instead of borrowing, repaid the Bangladesh Bank Tk590 crore on Thursday – the third day after the introduction of the "Islamic Banks Liquidity Facility" – bringing down their net borrowing as liquidity support to Tk4,657 crore.
In the first two days, five lenders – Islami Bank, Union Bank, Social Islami Bank, First Security Islami Bank and Global Islami Bank – borrowed Tk5,247 crore under the central bank initiative aimed at aiding Shariah-compliant banks with liquidity support for a short-term of 14 days.
Of the amount, Tk3,995 crore was borrowed Tuesday and Tk1,252 crore on Wednesday, while the Islami Bank Bank Bangladesh was the largest borrower, according to the Bangladesh Bank.
Talking to The Business Standard, insiders, however, said several Islamic banks still suffer liquidity stress owing to a deposit withdrawal spree.
"In the last few days, some corporate deposits have been withdrawn from our bank, causing a rapid fall in our liquidity. In contrast, many small customers have made fresh deposits," said a treasury head of an Islamic bank that borrowed a significant amount from the Bangladesh Bank liquidity facility.
"We are trying our best to provide customers with better services now. Our branch networks are performing well," he, wishing to remain unnamed, told TBS.
"Even amid the central bank support, some Islamic banks have been looking for longer-term loans from general banks, especially those having better liquidity conditions, to manage their crises. They are seeking the loans for at least three months," a managing director of a bank, seeking anonymity, told The Business Standard.
However, all the Islamic banks are not in a liquidity crisis, insiders said, and few are in a position to provide loans to other banks.
"We have a surplus liquidity of Tk3,200 crore, which is why we don't need the central bank's support," said Mosleh Uddin Ahmed, managing director and chief executive officer of Shahjalal Islami Bank Limited.
"Moreover, we have provided loans of around Tk2,000 crore for different short-terms to other banks in recent times," he told TBS.
Insiders said Shariah-based banks used to depend on the Islami Bank Bangladesh Limited largely for short-term loans, but the recent liquidity crisis in the largest Islamic bank has put them in trouble.
Before the introduction of the Islamic Banks Liquidity Facility on Monday, they also borrowed from each other.
At present, 10 out of 61 banks in the country are operating according to Shariah – a body of religious law that forms a part of the Islamic tradition. The banks are Islami Bank Bangladesh, ICB Islamic Bank, Al-Arafah Islami Bank, Social Islami Bank, Exim Bank, First Security Islami Bank, Shahjalal Islami Bank, Union Bank, Standard Bank and NRB Global Bank.