The Islamic banking sector in Bangladesh witnessed a paradoxical shift in June 2026 as institutions grappled with a significant liquidity squeeze while simultaneously expanding their investment portfolios.
According to the latest Bangladesh Bank (BB) data, the industry saw a contraction in total deposits even as financing activities maintained an upward trajectory.
Industry insiders point to a sharper decline specifically within full-fledged Islamic banks, which bore the brunt of the deposit exodus during the month under review.
They also say the uncertainty surrounding the appointment of the chairman of Islami Bank Bangladesh has affected deposits in Islamic banks as customers began withdrawing their funds.
According to them, the decision to appoint the chairman raised concerns among depositors.
They believe the decision created panic among customers, prompting them to withdraw their deposits.
The central bank’s report reveals a widening gap between deposit mobilisation and credit disbursement.
While the overall Islamic banking system saw total deposits slip by 2.68 per cent – equivalent to Tk 130 billion – to Tk 4.67 trillion in June compared to May, total investments climbed by 2.06 per cent, reaching Tk 6.12 trillion.
The overall Islamic banking system deposits stood at Tk 4.80 trillion, the central bank data showed.
Total investment of the Islamic banking system reached Tk 5.99 trillion in May.
This trend suggests banks are dipping into the existing liquidity buffers or relying on alternative funding sources to sustain their investment pace despite shrinking retail and corporate inflows.
The impact was most pronounced among the country’s full-fledged Islamic banks, which serve as the backbone of the Shariah-based financial system.
These institutions recorded a substantial deposit haemorrhage of Tk 172.62 billion in a single month.
Deposits at these specialised entities tumbled to Tk 3.89 trillion in June, down from Tk 4.06 trillion in May.
Meanwhile, migrant remittances coming through Islamic banks declined by 31.82 per cent to $448 million in June from $657 million in May.
However, on a year-on-year basis, deposits increased from Tk 4.52 trillion in June 2025 to Tk 4.67 trillion in June 2026, showing a moderate growth of around 3.31 per cent.
This year-on-year growth indicates a gradual shift in depositors’ preference toward Islamic banking.
Aftermath of the July uprising, the Bangladesh Bank’s surveillance for Islamic banks in terms of liquidity support, identification of weaknesses of the banks, and recruitment of administrators to improve management capacity of the banks, among others, may facilitate them to regain depositors’ confidence.
The report also finds that depositors continue to rely predominantly on Mudaraba-based deposits, which make up about 86.87 per cent of Islamic banks’ deposit base.
As of June 2026, Islamic banks’ deposit base was overwhelmingly driven by the private sector, which accounted for about 90.19 per cent of total deposits.
On a year-on-year basis, investments increased from Tk 5.70 trillion in June 2025 to Tk 6.12 trillion in June 2026, reflecting growth of nearly 7.37 per cent.
The moderate monthly increase reflects a prudent investment strategy, while the year-on-year growth indicates gradual expansion, driven by rising demand for Islamic financing products, particularly profit-and-loss sharing modes.
Islamic banks’ total assets stood at Tk 9.88 trillion in June 2026 compared to Tk 9.19 trillion in May 2026, indicating a month-on-month increase of about 7.43 per cent.
On a year-on-year basis, assets rose from Tk 9.74 trillion in June 2025 to Tk 9.88 trillion in June 2026, reflecting an increase of 1.42 per cent.
The steady year-on-year increase, along with the more pronounced monthly amplification, indicates that Islamic banks experienced a relatively stable but subdued asset position during the period.
Islamic banks contributed a smaller yet consistent share of 18.61 per cent of export earnings.
Their export receipts stood at $743 million in June 2026, up from $575 million in May 2026, indicating a month-on-month increase of 29.25 per cent.
On a year-on-year basis, export receipts increased from $688 million in June 2025 to $743 million in June 2026, reflecting an increase of 8.01 per cent.
Islamic banks‘ import payments stood at $991 million in June 2026, increased from $894 million in May 2026, reflecting a month-on-month increase of 10.85 per cent.
Remittances through Islamic banks decreased from $657 million in May 2026 to $448 million at the end of June 2026, indicating a decrease of 31.82 per cent.
On a year-on-year basis, Islamic banks’ remittances decreased from $612 million in June 2025 to $448 million at the end of June 2026, reflecting a decrease of 26.77 per cent.
Meanwhile, Islamic banks’ agent banking deposits stood at around Tk 253 billion in June 2026, decreasing from Tk 273 billion in May 2026, with a decrease of 7.64 per cent.
However, on a year-on-year basis, agent banking deposits increased from Tk 248 billion in June 2025 to Tk 253 billion in June 2026, reflecting a growth of around 1.99 per cent.
The data indicates that in June 2026, Islamic banks accounted for 49.40 per cent of the total deposits in the agent banking arena.
https://thefinancialexpress.com.bd/bangladesh/islamic-banks-face-deposit-drain
