6 troubled banks get nearly Tk5,000cr in liquidity support in 30 days

Highlights:

• BB issued around Tk5,000cr liquidity support to six banks
• Islami Bank received Tk1,495cr, Social Islami Bank Tk1,000cr
• Global Islami Bank Tk295cr, First Security Islami Bank Tk775cr
• Union Bank Tk150cr, National Bank Tk820cr
• Support provided by 5 banks, including Sonali, Dutch-Bangla, and Eastern Bank
• Four of the six banks received Tk875cr yesterday

The Bangladesh Bank, in the last 30 days, has issued liquidity guarantees amounting to nearly Tk5,000 crore for six struggling banks weakened by financial irregularities and loan frauds. 

Islami Bank Bangladesh Limited (IBBL) received Tk1,495 crore, Social Islami Bank Tk1,000 crore, Global Islami Bank Tk295 crore, First Security Islami Bank Tk775 crore, Union Bank Tk150 crore, and National Bank Tk820 crore, according to central bank sources.

These troubled banks were given liquidity support from Sonali Bank, Dutch-Bangla Bank, Eastern Bank, City Bank, and Mutual Trust Bank.

According to bankers, this support has helped restore customer confidence, reducing the rush to withdraw deposits from these banks. 

However, despite receiving liquidity support, these banks are still struggling to meet customer demands for deposit withdrawals.

According to central bank sources, four of the six banks received more liquidity guarantees worth Tk875 crore yesterday – IBBL Tk695 crore, Social Islami Bank Tk100 crore, Global Islami Bank Tk50 crore, and First Security Islami Bank Tk25 crore.

But, as per a senior central bank official, yesterday's total reached Tk920 crore as more liquidity guarantees were given to the banks in crisis. However, he was unable to confirm the name or names of the banks to The Business Standard.

During the reign of the previous government, these banks have become financially vulnerable due to various irregularities and corruption. In response, the central bank intervened to arrange funding through the interbank money market, with ten solvent banks agreeing to lend support under the guarantee of the Bangladesh Bank.

But, the senior central bank official has questioned the rationale behind supporting these failing banks, citing past mismanagement and significant sums of money syphoned off by former boards.

The interim government has so far dissolved the boards of 11 banks, including 8 controlled by the S Alam Group. 

According to Bangladesh Bank data, as of August, at least nine private banks were grappling with severe liquidity crises, with the combined deficit exceeding Tk18,000 crore.

First Security Islami Bank had the largest shortfall, with Tk7,269.66 crore, followed by Social Islami Bank with Tk3,394 crore, and National Bank with Tk2,342 crore. 

Other banks with substantial deficits included Union Bank with Tk2,209.15 crore, Islami Bank Bangladesh Tk2,201.95 crore, Bangladesh Commerce Bank Tk380.95 crore, and Global Islami Bank with Tk39.39 crore. 

Additionally, Padma Bank and ICB Islami Bank had deficits of Tk234.48 crore and Tk95.42 crore, respectively, as per the central bank data.