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BB Issues Warning to Islamic Banks Over Liquidity Concerns

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The Bangladesh Bank (BB) has issued a warning to five Islamic banks facing liquidity challenges, directing them to rectify negative balances in their current accounts within a 20-working-day timeframe. The spokesperson for Bangladesh Bank, Md Mezbaul Haque, confirmed this development during a press conference on Sunday. The warning letters were dispatched to Islamic Bank Bangladesh PLC, Social Islami Bank Limited, Union Bank PLC, First Security Islami Bank PLC, and Global Islami Bank PLC.

Haque clarified that the warning does not signify a decision to cancel money payment services, emphasizing that the ultimate decision lies with the Payment Systems Department despite the initiation of communication by the central bank’s Motijheel office. Liquidity issues in these banks have arisen from structural problems in Islamic banking, prompting the central bank’s proactive response.

Addressing the immediate focus of Bangladesh Bank, Haque stated, “The main goal of the central bank at this moment is to control inflation. Once we alleviate external pressure, the Bangladesh Bank will shift its focus to the governance of banks facing crises.”

The Payment Systems Department holds the authority to decide on the continuation of transactions with other banks if the deficit in the current accounts is not resolved within the specified 20 working days. Haque disclosed that ICB Islamic Bank Limited had previously received Tk700 crore in support. While the Bangladesh Bank routinely provides assistance to banks with negative current account balances, the warning letters dated 28 November explicitly instruct the banks to promptly adjust their negative balances.

The letter from the Motijheel office of Bangladesh Bank highlighted the prolonged negative current account balances, stating, “Although the matter has been brought to your attention repeatedly, you have not taken any significant steps so far.” It advised the banks to address the negative balance within 20 working days, warning that failure to do so would result in being barred from any clearing platform as per the contract signed with the Payment Systems Department.

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Cenbank Prolongs Import Payment Terms for Raw Materials Until Dec 2024

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The Bangladesh Bank (BB) has announced an extension for the payment period against imports of industrial raw materials from 180 to 360 days, a measure now set to remain in place until December 2024. This policy, initially scheduled to end in June of this year, has been prolonged to facilitate trade transactions, according to a BB circular issued today.

“To support trade transactions, it has been decided to extend the policy support until December 31, 2024. The extended usance period will not apply to imports under EDF loans, as previously stipulated. All other relevant instructions remain unchanged,” the circular stated.

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Banks in Industrial Areas to Open June 14-16 for Eid Payments

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To ensure timely payment of salaries and bonuses to garment industry workers before Eid-ul-Azha, the branches of banks in key industrial areas will remain open on a limited basis on June 14, 15, and 16.

The Bangladesh Bank (BB) issued a notification stating that bank branches in Dhaka metropolitan, Ashulia, Tongi, Gazipur, Savar, Bhaluka, and Narayanganj will operate on these days to facilitate financial transactions for garment sector employees.

Typically, Friday and Saturday (June 14 and 15) are weekly holidays, and Sunday (June 16) will be closed for Eid. Despite these closures, the BB has mandated that banks in industrial regions stay open to manage the disbursement of wages and bonuses and facilitate the sale of export bills.

Additionally, bank branches in Chattogram metropolitan and industrial areas will also be open to support garment workers’ payments and the processing of export bills.

The BB has instructed banks to coordinate with local authorities to ensure adequate security at the branches during this period.

Eid-ul-Azha, one of the most significant religious festivals for Muslims, will be celebrated in Bangladesh on June 17.

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Cenbank Mandates Real-Time Reporting of Willful Defaulters

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The Bangladesh Bank (BB) has issued new instructions to banks to submit data on willful defaulters to the Credit Information Bureau (CIB) database. This directive was issued on Tuesday, requiring immediate compliance from commercial banks and non-banking financial institutions (NBFIs).

In a circular released by the CIB of the central bank, banks have been instructed to report their June data in real-time starting July 1. The circular has been sent to top executives of banks for prompt execution.

This move follows an earlier initiative by the BB, outlined in a circular on March 12, aimed at identifying willful defaulters within the banking sector. The central bank also detailed actions to be taken against such defaulters.

According to the circular, any client who takes a loan anonymously and misuses it will be classified as a willful defaulter. Banks were directed to establish a ‘willful defaulter identification unit’ by April 9 to facilitate this identification process.

The circular further stipulates penalties for non-compliance. Banks that violate these conditions will face fines ranging from Tk 50 lakhs to Tk 1 crore. Continued violations will incur additional fines of Tk 1 lakh per day.

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