Depositors continued withdrawing funds from full-fledged Islamic banks in the October-December 2024 period, reflecting ongoing concerns over governance and financial stability, according to Bangladesh Bank’s latest report on Islamic banking.

Deposits at the 10 fully Shariah-compliant banks fell to Tk 3885.07 billion, the lowest since April-June 2023. This marked the second consecutive quarter of decline, with total deposits dropping 4 percent year-on-year from Tk 4038.50 billion in the same period of 2023.

In contrast, conventional banks with Islamic banking branches and windows saw an increase in deposits, which stood at Tk 512.52 billion at the end of 2024, the highest in two years. This represents a 30 percent rise from the previous year and a 12 percent increase from the last quarter.

“The decline in deposits reflects a loss of confidence in full-fledged Islamic banks following governance issues that surfaced after the change in political leadership in August 2024,” said Fahmida Khatun, executive director of the Centre for Policy Dialogue.

In response to financial irregularities, Bangladesh Bank restructured the boards of 11 banks, including Shariah-compliant institutions, to improve governance in a sector affected by loan scams and rising defaults.

Fahmida noted that depositors seeking Islamic banking services have shifted funds to more stable conventional banks offering Islamic banking facilities, reinforcing the trend of fund movement away from troubled banks.