Depositors’ trust in banks eroding

Editorial Desk :
Now we have data that show how the trust of depositors in Islami Bank Bangladesh Limited (IBBL) has eroded. The data released Thursday by the Bangladesh Bank showed that total deposits in Islamic banks declined to Tk 409,949 crore at the end of December 2022, down 2.71 per cent from Tk 421,375 crore in September. This otherwise means that after the bank’s loan irregularities surfaced in the media the panicked depositors withdrew Tk 11,426 crore in the three months. Since the bank’s total deposit was huge — it is the largest bank of the country—it survived the onslaught.
The trust of depositors was shaken heavily when the IBBL’s ownership was changed. On the pretext of stopping militants funding from the bank, the government took control of the bank. At that time it was apprehended by people well aware of the nature of this government that this top bank of the country has would be destroyed. And exactly that happened. One of the owners of the bank, S Alam Group, took out a loan much more than the limit prescribed by the bank’s law through loan irregularities.
The rush of withdrawing money from the bank was so huge that the bank authorities took loans from the central bank to meet the pressure on liquidity. According to reports, as of December 29, IBBL took Tk 8,000 crore under BB’s special arrangement. The other full-fledged Sharia-based banks also suffered similar cash crunch. Four such banks — First Security Islami Bank, Social Islami Bank Ltd, Union Bank and Global Islami Bank — took Tk 6,790 crore from the BB.
Now the question may be asked whether depositors have regained their confidence in the banks of the country. Not at all! Firstly, the people no longer believe that under this government good governance can be restored and
established in the banks and financial institutions. Secondly, the economy is going through such a huge crisis with food inflation so high that many people are finding it hard to manage two square meals a day, let alone saving money from their income to keep them in banks.
Besides the banks and financial institutions, the country’s capital markets are also going through one of the dried periods in their history.
But Islamic banks of the country including the IBBL have to be saved from the jealous eyes of the government and its beneficiary businessmen. Global ratings agency Moody’s Investors Service said Wednesday that Islamic banks in Bangladesh are more vulnerable to the tightening of liquidity than conventional banks because they have smaller liquidity buffers.