BM Desk :The Islamic divisions of traditional banks have increasingly become the preferred option for depositors with religious inclinations, as numerous fully-fledged Shariah-compliant banks face a crisis of trust. This trend has arisen following various controversies and financial scandals associated with Shariah-compliant banks, many of which were under the control of the contentious S Alam Group during the previous administration.
Despite a reshuffling of the boards of these banks after the political transition in August of last year, industry experts indicate that restoring public trust will require considerable time. By the end of 2024, the growth of deposits in the banking sector had decelerated to 7.47 percent. Nevertheless, 18 banks reported deposit increases surpassing 26 percent, with some Islamic divisions of conventional banks experiencing growth rates exceeding 100 percent.
A senior official from the central bank informed The Daily Star that certain traditional banks and their Islamic branches successfully attracted substantial deposits that had been withdrawn from approximately six struggling institutions. As financial irregularities at commercial banks associated with the S Alam Group came under investigation, depositors shifted their funds to banks with more robust financial health and reputations.
In 2024, National Credit and Commerce (NCC) Bank saw its deposits increase by only 13.04 percent, reaching Tk 25,410 crore. In contrast, deposits in its Islamic division surged by an unprecedented 110 percent, marking the highest growth in the banking sector.
“Last year, public confidence in some banks was significantly undermined, which played a role in our remarkable deposit growth,” stated M Shamsul Arefin, managing director of NCC Bank. He further explained to media that as customers of certain Shariah-compliant banks faced difficulties in accessing their savings, many sought alternative Shariah-compliant solutions. This shift has greatly benefited the Islamic banking branches of conventional banks.
“Arefin added that NCC Bank is financially stable and is expanding its Islamic banking services to meet the growing demand for Shariah-compliant financial offerings.”
At the conclusion of the previous year, Pubali Bank reported total deposits amounting to Tk 70,637 crore. The bank achieved an overall deposit growth of 21 percent, while its Islamic division experienced a remarkable increase of 91.18 percent. Mohammad Ali, the managing director of Pubali Bank, noted, “Many depositors have lost faith in fully-fledged Islamic banks, leading them to seek the Islamic divisions of established conventional banks.” He further emphasized that the bank’s high level of Shariah compliance has bolstered confidence in its Islamic banking services.
Similarly, Prime Bank experienced a 12.74 percent increase in total deposits last year, with its Islamic division witnessing a substantial growth of 61.34 percent. In a related context, Mutual Trust Bank’s Islamic wing reported a deposit growth of 66.34 percent, while One Bank’s Islamic division saw a 54 percent rise, as per data from the central bank.
Hassan O Rashid, managing director of Prime Bank, attributed the surge in Islamic banking deposits in Bangladesh to strong demand, favorable policies, and distinctive sector characteristics such as risk-sharing, financial inclusivity, and asset-backed transactions. “These features resonate with religious values and offer financial security,” Rashid stated.
Prime Bank was the pioneer among conventional banks in Bangladesh to offer Islamic banking services, launching them through five dedicated branches in 1995. Rashid added, “Our three decades of experience in Islamic banking, combined with Prime Bank’s financial robustness, digital banking initiatives, timely deposit products, and well-trained staff, have all played a role in this growth.”
Jamuna Bank reported an overall deposit growth of 26.31 percent last year, with its Islamic division growing by 27.17 percent. Mirza Elias Uddin Ahmed, managing director of Jamuna Bank, remarked, “Full-fledged Shariah-compliant banks are currently facing a temporary crisis of confidence, which has resulted in significant deposit growth in the Islamic divisions of conventional banks.”
He noted that the profit margins in the Islamic divisions of conventional banks are generally higher than those found in Shariah-compliant banks, which has led to an increase in the number of depositors. “This robust growth in deposits has greatly enhanced our liquidity position,” stated Ahmed. Midland Bank experienced an overall deposit growth of 29.77 percent last year, with its Islamic division achieving a 33.37 percent increase in deposits. Ahsan-Uz Zaman, the managing director and CEO of Midland Bank, informed The Daily Star that the bank’s ability to customize financial products to meet client needs is fostering greater public confidence.
“Customers now feel more secure in placing their savings with Midland Bank, which has played a significant role in our deposit growth,” he remarked. Last year, the Islamic banking sectors of other institutions also saw notable deposit increases, including Sonali Bank at 34.15 percent, Mercantile Bank at 29.15 percent, SBAC Bank at 28.69 percent, Trust Bank at 35 percent, City Bank at 20.40 percent, Meghna Bank at 72 percent, and UCB at 27 percent, as reported by central bank statistics. Conversely, several struggling banks, including some Shariah-compliant ones, experienced declines in deposits last year. BASIC Bank, Janata Bank, AB Bank, Bangladesh Commerce Bank, EXIM Bank, First Security Islami Bank, ICB Islamic Bank, National Bank, Padma Bank, and Social Islami Bank all reported negative growth in their deposits.
