The Islami Bank Bangladesh Ltd. (IBBL) has borrowed Tk 8,000 crore from Bangladesh Bank (BB) violating the Shariah rules to tackle liquidity crisis.
BB sources said the IBBL has been suffering from liquidity crisis for quite few months after dubious lending to some ghost companies with fake addresses.
The bank also failed to keep adequate CRR (cash reserve ratio) with the BB. The CRR shortfall was Tk 5,101 crore as on December 28, 2022.
The worried clients of IBBL withdrawn more than Tk 10,000 crore from this bank in the past two months after reports of irregularities were published in the newspapers, BB sources said.
Under the circumstances, the bank resorted to ‘Demand Promissory Note’ to avoid crisis and fines on December 29, the last working day of 2022. Under the system, the bank had to count 8.75 percent interest for taking loan worth Tk 8,000 from the central bank.
According press reports, there were incidents of taking loans worth thousands of crores of taka from Islami Bank by ghost companies with fake addresses. At least three such firms borrowed Tk 900 crore each just within one month of getting registered with the Registrar of Joint Stock Companies (RJSC) for setting up a trading business.
Each of the three companies, which have secured Tk2,700 crore in loans from Islami Bank, has used fake office addresses, which clearly demonstrates that these are shell companies and the real beneficiaries of these loans are anonymous, and the loans were given for the same purposes.
The Islamic Bank, being run on Shariah rules, pay profit instead of interest, the rate of which is finalized at the end of the year. But the one-day borrowing rate from the central bank was 8.75 percent which is not allow by Shariah rules.
Asked, Nazrul Islam, vice president of IBBL, told The News Times that the bank has not violated any Shariah rules by borrowing from BB. “We will give an explanation about this in due course.”
Dr Maulana Anwar Hossain Molla, principal of Badda Islamia Kamil Madrasha and prominent Islamic scholar, told The News Times that if someone borrows money on interest, it is a violation of the Islamic Shariah. Islam doesn’t allow usurious transactions, he added.
Professor Mustafizur Rahman, Distinguished Fellow of the Centre for Policy Dialogue (CPD), said, “I have seen news of various irregularities in the media regarding Islami Bank. In fact, the banking sector is now having a negative impact of anonymous lending. To deal with the ongoing economic crisis, the country’s banking sector should be brought back to order.“
He said, “Banking sector now needs good governance. Bangladesh Bank has to decide independently. Zero tolerance policy should be adopted. Banks must get out of the default culture.”
Mezbaul Haque , BB executive director and spokesperson, said, “I don’t think Islami Bank has taken loans because of major liquidity crunch. Sometimes there is no money even in a millionaire’s house. This does not mean that his family is in crisis.”
He said may be the bank needed some money urgently and took the loan. Maybe a payment they were supposed to receive didn’t arrive and they had to take loan from Bangladesh Bank, he observed.
He said BB’s job is to solve problem of banks. “As a regulator, we have a responsibility to save the bank at its crisis moment,” he said, without saying anything on Shariah rules.
