Excess liquidity in Bangladesh’s Shariah banks plummeted by 77% in March 2024 compared to December 2023, largely due to a trust deficit. According to Bangladesh Bank data, surplus liquidity in Islamic banks fell by Tk5,125 crore, reaching Tk1,518 crore in March 2024, down from Tk6,643 crore in December 2023 and Tk7,767 crore in September 2023.
This significant drop in excess liquidity—liquid assets beyond what is required for daily operations and regulatory obligations—poses challenges for banks in meeting immediate payment obligations and customer withdrawals. Only Shahjalal Islami Bank and Al-Arafah Islami Bank managed to substantially increase their surplus liquidity, while other Shariah-based banks saw severe erosion.
Five banks allegedly controlled by the Chattogram-based S Alam Group, including Islami Bank Bangladesh, faced negative excess liquidity in March 2024. These banks have struggled with liquidity issues since November 2022 due to reports of scams and loan irregularities, prompting mass withdrawals.
Despite the crisis, total loan disbursements by the Islamic banking system increased by Tk12,020 crore, reaching Tk456,994 crore in March 2024 compared to December 2023. To address the liquidity crisis, Bangladesh Bank has provided special facilities, including substantial financial support to struggling banks.
