United News of Bangladesh

Bangladesh Bank has reversed a contentious policy that barred depositors of five recently merged banks from receiving profits for 2024 and 2025, following widespread criticism and ethical concerns. The central bank’s move restores interest payouts, easing tensions among affected account holders. Under the new decision, depositors will now receive a 4 percent profit rate for those two years. Starting from the current year (2026), market-based profit rates will apply. Currently, the bank has announced a profit rate of approximately 8.5 percent. Read more: Banking sector reform can’t be done overnight: Salehuddin The central bank communicated this updated policy via a letter sent to the administrators of the affected banks on Wednesday (January 21). Backtrack on ‘Haircut’ Policy The reversal comes just a week after a January 14 directive which stated that no profit would be applicable to any deposits from January 1, 2024, to December 28, 2025. That letter even suggested that any profit already withdrawn by depositors would be "adjusted" from their principal amount, a process known as a ‘haircut’. The initial announcement sparked widespread outrage. Many depositors gathered at various branches of the newly formed Sammilito Islamic Bank PLC to express their anger. Furthermore, the Central Shariah Board intervened, stating it was ‘not Shariah-compliant’ to shift the burden of embezzlement, caused by the negligence of the banks and the regulator, onto the depositors. Read more: Depositors of 5 merged banks can withdraw Tk 2 lakh initially, then Tk 1 lakh every 3 months  The government recently created Sammilito Islamic Bank PLC by merging five Shariah-based lenders—Exim Bank, Social Islami Bank, First Security Islami Bank, Global Islami Bank, and Union Bank—that were weakened by massive loan irregularities and embezzlement. These banks hold approximately Tk 1.42 lakh crore in deposits from nearly 76 lakh depositors. In contrast, out of the Tk 1.92 lakh crore distributed as loans, roughly 77 percent has become defaulted. Shariah and Accountability Internal debates within the central bank and insights from Islamic banking experts played a key role in this policy shift. Experts pointed out that: Mudaraba Principles: In Shariah banking, depositors are "Sahib-al-Mal" (capital providers) and the bank is the ‘Mudarib’ (manager). Liability for Negligence While depositors normally share business losses, Shariah standards (specifically AAOIFI standards followed in Bangladesh) dictate that if a loss occurs due to the bank's negligence, misconduct, or breach of trust, the bank alone must bear the liability. Read more: Bangladesh Bank to ease rules, give banks more freedom: Governor By reinstating the profit, the central bank acknowledges that depositors should not be penalised for the systemic failures and financial crimes that led to the banks' instability.

Bangladesh Bank (BB) is drafting separate rules to regulate the Islamic banking system in the country, a move that has stirred mixed reactions among bankers and analysts. An Executive Director of the central bank, who is involved in drafting the rules, said that under the proposed regulations, conventional banks would no longer be permitted to offer Sharia-based banking services directly. Instead, banks would need to establish subsidiary institutions to operate Islamic banking. “If this law comes into effect, conventional banks will not be able to provide Sharia-based banking services,” the official added. DSE trading ends with upward trend on Sunday Some bankers, however, argue that this move could contradict Bangladesh’s long-standing commitments under the Islamic Development Bank (IDB). The country became a signatory to the IDB in the 1980s, which facilitated the introduction of Sharia-based banking within conventional banks. Mohammad Abdul Mannan, former Managing Director of Islami Bank Bangladesh, expressed concerns about the implications of the proposed regulations. “New law (regulations) regarding establishment of subsidiaries instead of Islamic banking windows for conventional banking will be contradictory with the declaration of IDB,” he told UNB. Instead of conflicting with the IDB’s declaration, he said, the central bank could set up a dedicated department to monitor Sharia compliance and fund management in Islamic banks. Syed Mahbubur Rahman, Managing Director of Mutual Trust Bank, highlighted the current success of Islamic banking windows and branches operated by conventional banks. DSE index gains 30.88 points as 211 stocks rise in early trading “All the banks that are doing Islamic banking through windows or branches are in good condition. I don't think that making one Islamic and the other traditional will yield good results. If we prepare separate balance sheets and income statements and follow the instructions of the central bank properly, [it] would be more effective and time-befitting,” he said. Mahbubur Rahman went on to say, “If they monitor properly, and if the Sharia board is in place properly, then I think there should be no problem here.” But some analysts view the situation differently. While acknowledging the financial viability of Islamic banking under conventional banks, they pointed out challenges related to Sharia compliance. Former Chairman of the Association of Bankers Bangladesh (ABB) Mohammad Nurul Amin questioned the integrity of current practices. “The balance sheet of the conventional bank is also the same as that of the Islamic branch. How much is Sharia-based and correct?” he asked. Dr Toufiq Ahmed Chowdhury, former Director General of the Bangladesh Institute of Bank Management, supported the idea of separate rules, questioning the authenticity of Islamic banking in its current form. He said, “I personally support a separate law. Here, we are not actually doing Sharia-based banking to conduct business; we are doing it to make money, taking some money from people in the name of Islam. When it is launched, is it truly Islamic banking? Not even 1.0 percent of the total portfolio is PLS. So, why is it being called Islamic banking?” 18 banks at risk due to potential loan defaults by top 3 borrowers: Bangladesh Bank According to central bank officials, the draft law is still under review, and no final decision has been made. Husneara Shikha, Executive Director and spokesperson for BB, stated that stakeholder consultations are essential before finalising the law. “When making a law, various types of stakeholder consultation and analysis [have] to be done. What are the international policies? At the international level, conventional banks never open Islamic windows,” she explained. The Islamic Bank Company Act will be finalised after incorporating opinions from all stakeholders. Islamic banking is a banking system aligned with the spirit, ethos and values of Islam, operating in accordance with the principles outlined by Islamic Shariah. Currently, Bangladesh has 10 fully-fledged Sharia-based banks, in addition to 30 conventional banks offering Islamic banking services. These conventional banks operate 33 Islamic banking branches and around 700 windows for Sharia-based services.

Islami Bank Bangladesh Wednesday organised a programme of prayer to mark its 38th founding anniversary in the capital. Professor Md Nazmul Hassan, chairman of the bank, addressed the function on a virtual platform as the chief guest. Presided over by Mohammed Monirul Moula, managing director and chief executive officer of the bank, the programme was attended by additional managing directors Muhammad Qaisar Ali and Md Omar Faruk Khan. Deputy managing directors Abu Reza Md Yeahia, Taher Ahmad Chowdhury, AAM Habibur Rahman and Md Mosharraf Hossain also joined the programme. Also read: Islami Bank Inter-Zone Cricket Tournament 2021 held Prayers were offered for the overall progress of the bank, the well-being of all the directors, executives, officers, employees, clients, and well-wishers and the safety of the people amid the Covid-19 pandemic. Professor Nazmul Hassan said Islami Bank was established with the motto of conducting Shariah-based banking. "A large segment of clients in the banking sector are out of Islamic banking services; we have to address them. Islami Bank has been able to come to its present position with honesty, sincerity and devotion of its officers and employees and the support of the people," Nazmul said. Also read: Islami Bank organises discussion meeting, prayers on 50th anniversary of Independence "The bank has been playing an important role in alleviating poverty by conducting asset-based and welfare-oriented investment activities along with creating large industrial groups." Munirul Moula said Islamic banking is a successful reality now in Bangladesh. "Islami Bank has become the top bank in the country in all activities including import, export and remittance services."