Fears of Distrust Even After Governor's Assurance
Arrow towards Islami Bank after six Shariah-based banks face trouble
Graphics: Agamir Somoy
Six of the country’s ten full-fledged Islamic banks are effectively becoming weak. Despite continuous monitoring by the central bank, the regulator of the banking sector, customers have lost confidence in these institutions. They are unable to withdraw their money. To resolve the crisis, Bangladesh Bank formed a combined Islamic bank incorporating Social Islami, First Security, Union, Global Islami, and Exim Bank, but clients confidence has not been restored. Depositors of Standard Bank and ICB Islamic Bank are also unable to withdraw money as they want.
On Wednesday and Thursday last week, thousands of customers at nearly all branches of the country’s largest Islamic bank were reportedly unable to withdraw money as needed — such allegations have emerged. According to insiders, this has affected all banks.
Zakir Hossain Liton, a customer of the Islamic Bank head office complex branch, said he cannot withdraw money from Islamic Bank. On Wednesday and Thursday, he went to the branch but could not withdraw money using cheques. The branch manager requested him not to withdraw money. He was unable to withdraw money from ATMs in Mugda, Motijheel, Dilkhusha, Karwan Bazar, and Malibagh in the capital. Even from other banks’ ATMs, he failed to withdraw money until Friday night. His fear is that keeping money in Islamic Bank means inviting trouble.
Mosleh Uddin, Managing Director (MD) of Shahjalal Islami Bank, said, “The instability in Islamic Bank has started affecting all banks. Islamic Bank’s single contribution to remittances is about 32 percent. If this bank is damaged, that gap will not be filled. Then the country’s remittance collection will severely decline. Moreover, it is tough for other banks to handle the large clients of this bank. Additionally, if this bank goes bankrupt, a perception will be created in the public mind that Islamic banks mean trouble. Because the country’s Islamic banks already cannot disburse money on time. If this continues, customers will not keep money in any Islamic bank. This raises concerns about the future of all Islamic banks.”
Habiba, a customer of Islamic Bank’s Habiganj branch, said she could not withdraw money last Thursday. Similarly, Ali Hossain, a customer of Islamic Bank’s Rangpur Dhap branch, said he could not withdraw 10 lakh taka last Thursday. Fahima Yasmin, a customer of the New Market branch in the capital, said, “Given what has been happening with Islamic Bank for some days, it feels like someone will take away the money again. On Tuesday, the branch manager told me that I would be able to withdraw money whenever I need it. But on Thursday, they refused to take my cheque. Earlier, despite assurance from former Governor Ahsan H. Mansur, I could not withdraw 5 lakh taka from Union Bank.”
On June 10, the Association of Bankers, Bangladesh (ABB), an organization of bank chief executives, and its Chairman and Managing Director (MD) of City Bank, Mashrur Arefin, expressed deep concern during a meeting with Bangladesh Bank Governor Md Mostaqur Rahman regarding the ongoing instability at Islamic Bank. The organization stated that a swift resolution of the current problems at Islamic Bank would be beneficial for the banking sector; otherwise, the impact of the crisis would affect all banks.
The Acting Managing Director of Islamic Bank told Agamir Somoy on Saturday that there were issues with large checks at some branches last Thursday. However, since the Governor has given assurances, there is no reason to panic. If Bangladesh Bank provides support with cash, customers will get their money.
When asked about the Governor’s assurance, Mohammad Shahriar Siddiqui, Deputy Spokesperson of Bangladesh Bank, told Agamir Somoy, “Banking runs on trust. The Governor has given his word, meaning customers will get their money. We kept everything under surveillance. Still, customers of some banks did not receive money then. That is true.”
According to Bangladesh Bank data, the total deposits in the ten Islamic banks stood at Tk 408,000 crore as of March. Among these, Islamic Bank alone holds Tk 191,000 crore in deposits. Furthermore, approximately $83 billion in remittances have come through this bank to date. In May last year alone, remittances through this bank amounted to around $600 million, while the remaining nine Shariah-based banks collectively received only $61 million in remittances. Considering imports, exports, investment, and employment, some 80 million people are directly or indirectly associated with this bank. The bank alone has 3 crore account holders.
A crisis has emerged surrounding the appointment of Khurshid Alam as the new chairman of Islamic Bank. Over the past few days, customers have been withdrawing deposits abnormally. However, on Wednesday and Thursday, a rush to withdraw money led the bank to centrally restrict cash withdrawals.
On June 12, addressing the ongoing situation surrounding Islamic Bank Bangladesh PLC, Governor Mostaqueur Rahman called on depositors not to worry, stating that depositors would be able to withdraw their money at any time and would face no difficulties. He assured that necessary support would be provided to the bank.
Professor Dr. Ahsan Habib of the Bangladesh Institute of Bank Management said, “Islamic Bank is a pillar of the banking system. The bank plays a unique role in employment, business, investment, and remittances.”
At a press conference organized at the Dhaka Reporters Unity (DRU) in Segun Bagicha, Dhaka, on Saturday, the convener and spokesperson of the Conscious Customers Forum, Professor Nur-un-Nabi, announced a tough program to implement a seven-point demand, including the removal of recently appointed Chairman of Islamic Bank, Md. Khurshid Alam.