Bangladesh Bank is extending liquidity support to struggling Islamic banks, acting as a “lender of last resort” under the governor’s authority. Abdur Rouf Talukder, the central bank chief, highlighted the empowerment of the governor to provide such support. The move is a response to liquidity challenges faced by Islamic banks like Islami Bank Bangladesh, Social Islami Bank, First Security Islami Bank, Union Bank, and Global Islami Bank, experiencing deficits in their current accounts.
Talukder acknowledged structural issues within Islamic banks, lacking sufficient securities for borrowing compared to conventional banks. Both Islamic and conventional banks are resorting to central bank borrowing amid tight liquidity in the sector, with increased demand for foreign currency and rising investments in Treasury bills and bonds contributing to a cash reserve squeeze in the first half of FY24.
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