5 Islamic banks took out 14,790cr loan on last week of Dec 2022

Business Desk :
Islamic banks’ liquidity crisis is rapidly spilling out and they borrowed Tk14,790 crore from the central bank to address the situation on the last working day of 2022.
Sources claim that Bangladesh Bank disbursed this loan on December 29 at an interest rate of 8.75%.
However Islamic banks’ concept is, they make a profit through equity participation, which requires a borrower to give the bank a share in their profits rather than paying interest. In practice, shariah-based banks do not borrow money by offering interest, rather they provide “profits” on the amount. However, the five banks have been forced to do so owing to their cash reserve ratio (CRR) falling short. Among the five Islamic banks, Islami Bank Bangladesh took the biggest amount. Islamic Bank Bangladesh, the country’s largest private lender in terms of deposit and credit, has taken Tk8,000 crore. On the other hand, First Security Islami Bank, Social Islami Bank, Union Bank and Global Islami Bank collectively took Tk6,790 crore on December 29.
Among them, First Security Islami Bank took Tk3,125 crore, Social Islami Bank took Tk1,500 crore, Union Bank got Tk1,465 crore and Global Islami Bank’s loan was Tk700 crore.
That means the five Islamic banks collectively took Tk14,790 crore from the Bangladesh Bank or “lender of the last resort”.
These five banks provided an equivalent amount of demand promissory note to Central Bank against the overnight Overdraft account (OD) facility.
CRR is a portion of the bank’s deposits that it must keep with the central bank in cash to protect depositors’ interests. In Bangladesh, the CRR is 4%.
However, a Shariah-based bank is not supposed to borrow by offering interest.
Regarding this Mezbaul Haque, executive director and spokesperson of Bangladesh Bank said: “We have provided these facilities as we have no specific instrument for these Islamic lenders to save them.”