AKM ZAMIR UDDIN

Investments made by full-fledged Islamic banks in Bangladesh surged nearly nine times their deposits in a span of a year, raising questions as private sector credit growth has slowed in the entire banking sector, official figures showed.

The banks registered an increase in investments, or loans, by Tk 46,011 crore in January-March of 2023 compared to the identical quarter of 2022. Deposits rose by Tk 5,169 crore during the same period, data from the Bangladesh Bank showed.

On top of that, the full-fledged Islamic banks, now numbered 10, were the biggest sufferers of fund withdrawals after the banking sector was hit with fresh loan irregularities: they lost deposits amounting to Tk 427 crore in the first quarter of this year in comparison to the last quarter of 2022.

They collectively held deposits to the tune of Tk 379,524 crore in March, down 0.11 per cent from Tk 379,951 crore in December. It was up 1.38 per cent from March last year, however.

Investments at the banks stood at Tk 412,397 crore as of March, an increase of 1.18 per cent from three months ago and 13.44 per cent a year earlier.

“The abnormal investment growth against a feeble deposit growth is a matter of concern,” said Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

“The indicators highlight the weak financial health of the banks. The central bank should investigate why the banks have given out an excessive volume of loans. The asset quality of the banks should also be verified.”

Some Shariah-based banks have also faced a wide range of scams in recent times, denting the confidence of depositors.