Bangladesh Bank injects Tk 25bn more in liquidity support to Social Islami, First Security banks

Bangladesh Bank is providing direct support to two banks undergoing a liquidity crisis.

The central bank provided Tk 25 billion to two Islamic banks – Social Islami Bank and First Security Islami Bank – on Thursday.

The banks had petitioned for the support last week and it was granted by Bangladesh Bank Governor Ahsan H Mansur on Thursday, confirmed the central bank’s director and spokesman Shahriar Siddiqui.

Shahriar said the central bank provided direct liquidity support of Tk 15 billion to Social Islami Bank and Tk 10 billion to First Security Islami Bank.

“We can call it high-powered money, or money that was printed. This liquidity support was provided without collateral.”

Following the government changeover, control of the boards of directors from seven banks were taken away from the S Alam Group. A number of reforms began in the banking sector after Aug 5.

Mansur was appointed as the governor of Bangladesh Bank soon afterwards. After taking up the post, he stopped providing liquidity support to the banks under the control of S Alam.

The governor said that liquidity support would not be provided to these banks illegally. Since then, Islamic banks have faced a severe liquidity crisis. Depositors began withdrawing their money from Islamic banks as rumours spread that they would be closed.

The liquidity strain resulted in these banks limited cash withdrawals to Tk 10,000 and even Tk 5,000 in some cases.

At the time, the central bank proposed that these struggling banks get liquidity support from other banks. When that support was not forthcoming, Bangladesh Bank stepped in and provided Tk 225 billion to six banks.

Governor Mansur told reporters in a press conference at the time that the liquidity support was provided by printing money. However, he also claimed that on the other hand, the central bank would withdraw money from the banks through the “Bangladesh Bank Bill”.

Mohammad Saiful Alam, head of the S Alam Group, was the chairman of First Security Islami Bank, and his son-in-law Belal Ahmed was the chairman of Social Islami Bank.

After the initial money injection in November, these banks will be given additional support.

So far, the central bank has provided approximately Tk 295 billion in liquidity support under Mansur’s tenure.

Of this, Tk 55 billion has been given to Social Islami Bank and Tk 65 billion to First Security Islami Bank. Apart from this, Tk 50 billion has been given to National Bank, Tk 20 billion to Union Bank, Tk 2 billion to Bangladesh Commerce Bank, Tk 100 million to ICB Islami Bank, Tk 20 billion to Global Islami Bank, Tk 85 billion to Exim Bank and Tk 2 billion to AB Bank.