Depositors Can Safely Withdraw Funds From Islami Bank

The Governor of Bangladesh Bank, Md Mostakur Rahman, has assured depositors of Islami Bank Bangladesh PLC that they will face no impediments when withdrawing their funds. Speaking at a post-budget press conference for the 2026–27 fiscal year, held at the Osmani Smriti Milonayoton in Dhaka on Friday, 12 June, the Governor addressed mounting concerns regarding the bank’s liquidity. He stated that the central bank possesses specific regulatory mechanisms that will be deployed within the coming days to stabilise the institution and ensure unhindered transactions for all account holders.

The high-profile press conference was attended by the central bank Governor alongside ten government ministers, state ministers, and advisers. Responding to queries regarding a broader crisis of confidence in the banking sector, temporary cash shortages, and the specific operational hurdles facing Islami Bank, the Governor pledged that Bangladesh Bank would extend emergency liquidity support to the Sharia-based lender as required.

Board Restructuring, Chairmanships, and Regulatory Oversight

The Governor clarified recent administrative adjustments at Islami Bank, which had sparked widespread public debate and street protests. Since the tenure of the interim government, the bank had been managed by a five-member board of directors. However, following specific allegations, one board member was replaced. Subsequently, just prior to the Eid holidays, the independent chairman of the board tendered his resignation. Because central bank regulations dictate that a systemically important bank cannot legally operate with fewer than five board members, Bangladesh Bank had to immediately appoint a new director to maintain functional continuity.

In response to subsequent controversies and demonstrations surrounding the new board appointments, the central bank took decisive regulatory action on Wednesday by appointing an internal observer to oversee Islami Bank’s daily operations. Md Ashraful Alam, an Executive Director of Bangladesh Bank, was officially assigned to this monitoring role. The instability at the bank also drew attention inside the National Parliament, triggering intense debates between lawmakers of the ruling Bangladesh Nationalist Party (BNP) and the main opposition party, Bangladesh Jamaat-e-Islami.

Rising Advance-Deposit Ratio Triggers Liquidity Crisis

The political and administrative disputes prompted a wave of panic withdrawals, causing customers to pull significant volumes of capital out of the institution. This sudden drain resulted in a severe liquidity shortage, disrupting automated teller machine (ATM) operations and restricting cash withdrawals across various physical branches. In an effort to mitigate the cash crunch, the management of Islami Bank formally requested a financial lifeline of 10,000 crore taka in loans from the central bank.

Governor Md Mostakur Rahman expressed concern over the bank’s deteriorating financial metrics, specifically highlighting its Advance-Deposit Ratio (ADR). In July 2024, Islami Bank’s ADR stood at 93 per cent, but it has since escalated to 97 per cent. This significantly exceeds the statutory ceiling of 92 per cent mandated by the central bank for Islamic banking institutions. The Governor confirmed that Bangladesh Bank has officially directed Islami Bank’s executive management to implement immediate measures to bring the ratio back within the permissible regulatory limits.

Institutional Mechanisms for Banking System Stability

As the primary monetary authority and regulatory body for the financial sector, Bangladesh Bank is legally empowered to intervene in banking operations to maintain systemic stability and protect public deposits. Under the Banking Companies Act, 1991, the central bank utilizes tools such as the Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) to regulate cash flows within commercial banks. When an institution faces sudden, panic-driven withdrawals, the central bank can act as the lender of last resort, offering emergency liquidity windows or special repo facilities against approved securities.

Furthermore, systemically important banks—defined as institutions whose financial distress could trigger a domino effect across the broader economy—are subjected to intensified surveillance, including the direct deployment of central bank observers to board meetings. These interventions are structured to restore financial discipline, ensure adherence to credit-to-deposit thresholds, and rebuild public trust in national financial intermediaries during periods of macroeconomic adjustment.