Bank-Insurance
BB Issues Warning to Islamic Banks Over Liquidity Concerns
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.
In light of the current situation, Bangladesh Bank has mandated that all banks and financial institutions refrain from charging additional fees for late payments of credit card bills and loan installments.
The central bank issued this directive through two separate notifications on Wednesday, providing a significant relief measure to the financially burdened.
Borrowers and credit card holders who were required to make payments during the curfew and public holidays now have until July 31 to settle their dues. Bangladesh Bank has explicitly stated that banks and financial institutions are prohibited from imposing any extra interest, penalties, or late fees for installments or credit card bills due between July 18 and 25. Furthermore, no savings schemes shall be canceled for non-payment of installments during this period.
The central bank’s notification acknowledges that many borrowers and credit card users have struggled to meet their payment deadlines due to the prevailing circumstances.
Additionally, numerous depositors have been unable to make timely deposits into various savings schemes, including the Deposit Pension Scheme (DPS). To address these challenges, the new guidelines will be in effect from July 18 to 25, covering dues on loans, credit card bills, and savings scheme installments.
According to the directive, if the outstanding loan and credit card payments are settled by July 31, any accrued interest, penalty interest, additional interest, excess profit, or late fees will be waived. Similarly, if savings scheme installments are paid by July 31, no late fees or penalties will be imposed.
Moreover, any interest, penalty, or late fee already collected on loans, credit cards, or savings schemes must be refunded or adjusted, as per the Bangladesh Bank directive.
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.
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.
