Bangladesh Bank relaxes provisioning rules for investments in merged Islamic banks

Staff Report: PNN

Bangladesh Bank has taken a new decision to reduce pressure on banks and financial institutions affected by large amounts of blocked funds in five merged Shariah-based banks. The requirement to maintain provisions (safety reserves) against these investments has been temporarily lifted.

The decision was announced on Thursday (April 30) by the relevant department of the central bank. As a result, institutions that have invested large sums in these merged banks will get some relief from financial pressure.

The merged banks include First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank, and Exim Bank. These banks have been brought under a unified framework to address financial distress.

According to central bank sources, more than 15,000 crore taka is stuck in these merged banks from various financial institutions. A significant portion of this money from one Islamic bank has still not been recovered.

Initially, instructions were given to maintain provisions against the blocked funds, but later review showed that such provisions are not mandatory because the funds are under a special arrangement and may be recovered in the future.

Central bank officials said that the institutions may either recover their money directly, or receive equivalent value through long-term deposits (FDRs) or shares.

However, analysts believe that although this decision reduces immediate pressure, full recovery of the blocked funds remains a major long-term challenge.