According to the draft ‘Islamic Bank-Company Act, 2024’—a bank cannot carry on Islamic banking alongside conventional banking. Because the central bank wants to create a level playing field for conventional and Shariah-based banks. As of last June, 30 conventional banks have provided Islamic banking services through their 33 branches and 688 windows.

If the law comes into effect, banks will have to change their business model or form subsidiaries to provide Islamic banking services.

Bangladesh Bank Assistant Spokesperson Mohammad Shahriar Siddiqui, the head of the drafting committee, said, “If conventional banks offer Islamic banking services, there is no equal opportunity for conventional and Shariah-based banks.”

Although this practice continues worldwide, some countries have rules to keep Islamic banking.

The fundamental difference between conventional and Islamic banking is interest. Conventional banks give or take interest. Shariah-based banks share profits.

The need for this draft arose in the context of rapid popularization of Shariah-based banking laws that began in the country in 1983 without effective guidance.

As of last June, 23.65 percent of the total assets of the banking sector, 26.23 percent of deposits and 28.24 percent of investments are Islamic banking.

Currently there are 10 full-fledged banks based on Shariah. Some of these banks have been embroiled in irregularities and financial scandals in recent years.

He also said, “The drafting committee is preparing the draft in accordance with the international system by reviewing the existing provisions of the central bank for Shariah-based banks and the laws of Islamic banks in other countries.”

The banking regulatory body is taking its opinion on the draft approved by the governor on October 9.

The 30 conventional banks currently offering Islamic banking services must inform the central bank in writing of their preferred banking system within six months of the law coming into effect.

Banks will then have three years to become full-fledged Islamic banks or cease Shariah-based operations. In special cases the period can be extended by one year.

However, banks can continue other types of banking until the liabilities are paid off or the deposits and loans expire.

The word ‘Islam’ shall be used in the name of the Islamic Bank registered under this Act.

An Islamic banking institution cannot purchase shares controlled by an existing institution for the purpose of forming a subsidiary or converting into a subsidiary for purposes other than providing Islamic banking services.

Under the Act, the Central Bank will constitute a Shariah Advisory Board.

An Islamic bank will not be involved in business that is not permitted by Shariah.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank and former chairman of Association of Bankers Bangladesh (ABB), said, ‘We welcome the law. It is needed. However, this is not the right time to ban conventional banks on Islamic banking.

Except for two or three banks, the financial condition of Sharia-based banks is not good.

He also said, “If restrictions are given in this situation, the customers of conventional banks (Shariah branches or windows) will not get a suitable alternative.” They will suffer.

He feels that now Islamic banking branches and windows are doing better than full-fledged Islamic banks.

According to him, ‘Foreign banks like Standard Chartered are operating both conventional and Islamic banking. If accounts can be kept separately, then there is no problem in Islamic banking.

Syed Mahbubur Rahman said, “Guidelines and supervision are more important than obstacles.”

Professor and former chairman of Banking and Insurance Department of Dhaka University. Main Uddin said, “When the conventional banks in the country saw that there is a possibility of getting more profit and customers. Then they opened Islamic banking branches and windows.

He also said, ‘If the law with these clauses is passed, the banks will pay special attention. Their investment will also increase. Initially it is positive.

According to him, it should not be interrupted for a long time. When there are no barriers, the quality of service and competition will increase.

If there is no competition, there is a danger that the quality of service will deteriorate.

He also thinks that ‘considering the size of the economy, there are many banks in the country, some banks may come under the merger and acquisition or termination process’.