Continued protests by a section of Islami Bank customers have triggered a surge in deposit withdrawals, placing the country’s largest Shariah-based lender under mounting pressure.
The bank lost Tk 4,240 crore in deposits within seven days following protests that began on June 1 against the appointment of Md Khurshid Alam as new chairman by Bangladesh Bank. The demonstrations under the banner of Conscious Customers’ Forum have disrupted operations at several branches.
According to internal data, Islami Bank’s total deposits fell from Tk 1,84,382 crore on May 31 to Tk 1,80,141 crore on June 7.
Talking to The Daily Star yesterday, Md Altaf Hossain, acting managing director of Islami Bank, acknowledged that the lender is facing significant withdrawal pressure. “Many customers are withdrawing their deposits due to the ongoing instability.”
He said deposits were also declining because of negative campaigns, customer demonstrations at branches, and seasonal factors. Many businesses are additionally withdrawing funds to meet operational needs. “The situation may return to normal once the current instability subsides.”
According to Altaf, the bank’s recent downgrade to the Z category in the stock market has also contributed to deposit outflows and increased pressure on the institution.
Khurshid’s appointment at Islami Bank was announced on May 24. On June 1, the first working day after the Eid holidays, hundreds of people gathered in Motijheel, demanding that Bangladesh Bank cancel his appointment and reinstate former Islami Bank MD Omar Faruk Khan.
Khurshid was among four senior BB officials who resigned amid protests by central bank employees shortly after the fall of the Awami League government on August 5, 2024.
In a statement, the Conscious Customers’ Forum said officials and employees enforced a two-hour work stoppage yesterday in support of its seven-point demand, including the resignation of the bank’s “illegal chairman”, the protection of depositors’ funds, the safeguarding of customer interests, and the removal of alleged bank looters linked to the S Alam Group.
‘JAMAAT LINKS’
Although the Forum presents itself as a customer platform, industry insiders alleged that it gets support from Jamaat-e-Islami. Several bank employees are also believed to be sympathetic to the party.
In a statement on June 1, Jamaat Secretary General Mia Golam Porwar said police attacked ordinary customers protesting to protect the bank. He strongly condemned the police action and declared the party’s support for the protesters’ demands.
On June 5, Rezaul Karim, member of the party’s central executive committee, wrote on Facebook that expatriate Bangladeshis would join the protesters.
According to the post, overseas Bangladeshis could launch various programmes, including a remittance shutdown similar to that seen during the July uprising, if the government fails to address customers’ demands and continues “policies associated with the AL regime”.
It warned of a broader movement involving customers at home and abroad, saying transparency, accountability, and customer protection must be ensured at the bank.
Individuals affiliated with Jamaat and various Islamic organisations played a significant role in the bank’s formation in 1983. Over the years, shifts in the country’s political landscape have repeatedly influenced the bank’s board and management.
Asked about the alleged links between Jamaat and the Customers’ Forum, acting MD Altaf declined to comment.
He also denied allegations that bank officials were involved in the protests.
On June 1, Arif Hossain Khan, spokesperson for Bangladesh Bank, told journalists that no bank should be identified with a particular political party. “A political identity poses an extreme risk to a bank’s existence.”
He warned that if a bank seeks to grow under a specific political identity, it could become a serious threat to its long-term sustainability.
BAD LOANS
Islami Bank currently holds the largest volume of non-performing loans in the banking sector, amounting to Tk 95,629 crore, or 50.88 percent of its total loans.
The bank was taken over by the S Alam Group in 2017. The conglomerate later channelled around 80 percent of the bank’s loans to its own companies and affiliated firms, according to allegations widely documented in the banking sector.
Following the fall of the AL regime, the bank was freed from the group’s control and is now operating under a board of independent directors appointed with the oversight of Bangladesh Bank.
“A large share of the defaulted loans is linked to the S Alam Group, and recovery remains minimal,” Altaf said.
He added that the bank is trying to recover loans from other borrowers as well, but progress has been slow because even regular customers have become reluctant to repay.
