Bangladesh Bank has taken the initiative to merge weak banks with good banks to restore order and good governance in the banking sector. Padma Bank has already entered into an agreement to merge with Exim Bank. Perhaps after Padma Bank, ICB Islamic Bank is on the list of central bank mergers, as the Shariah-based bank is facing a liquidity crunch.

The Shariah-based bank, which emerged from the wreckage of Oriental Bank in 2008, has been facing severe liquidity crunch since the beginning of the year. So it is said that it is struggling to continue the activities at full speed.

According to the data of Bangladesh Bank, at the end of 2023, the bank has a capital deficit of 1 thousand 823 crore rupees. At the same time, 87 percent of the disbursed loans (investments) of Tk 790 crores 4 lakhs have become defaulters.

The Daily Star learned from Bangladesh Bank officials that the situation of the bank is so dire that they have no securities against which they can borrow money from other Islamic banks and the central bank. It is also known that the bank is paying the salaries of the employees step by step.

Bangladesh Bank's off-site supervision department had requested the banking regulations and policy department to take corrective action against ICB, as the bank is virtually closed due to liquidity crunch.

An official of the Central Bank told Daily Star, 'There is a possibility of merger of ICB Islamic Bank with a strong bank under the Prompt Corrective Action Framework of the Central Bank. Because of accumulated deposits, capital shortage, high non-performing loans and liquidity crisis, the bank is now at systemic risk.

ICB Islami Bank applied for unsecured Tk 50 crore liquidity assistance to Bangladesh Bank on January 31 to solve the financial crisis. However, after two weeks, the Central Bank rejected the application. Because ICB Islamic Bank already had a liability of Tk 425 crore to Bangladesh Bank.

Spokesperson of Bangladesh Bank. Majbaul Haque said, "The bank has no acceptable securities, which is why the Central Bank has rejected the request for liquidity assistance."

He also said, 'If desired, the owner can also provide money for the operation of ICB Islamic Bank.'

When asked about this, ICB Islamic Bank Managing Director Muhammad Shafiq Bin Abdullah said, 'We have appealed against the decision of the Central Bank. Some banks are getting central bank liquidity support, but we have been turned away.'

Muhammad Shafiq Bin Abdullah denied the issue of payment of salaries and allowances to the employees in stages and said, 'Not only ICB Islamic Bank, but most of the banks are suffering from liquidity crisis.'

He also said, 'All types of banking activities including legacy issues and loan disbursement are going on normally, including the Central Bank's liability of Tk 425 crore.'

However, three officials of ICB Islamic Bank told The Daily Star on condition of anonymity, "The bank is struggling to pay the full salary of the employees at the end of the month."

They know that there are 350 employees in 33 branches of ICB Islamic Bank.

This is the financial condition of the Shariah-based bank despite the fact that the central bank has appointed observers.

Director of Bangladesh Bank. Rajab Ali was posted to ICB Islamic Bank as an observer in 2022. But, like his predecessors, he failed to bring any positive change.

Md. Rajab Ali told The Daily Star that he attends the bank's quarterly virtual meetings, but the bank's problems are not discussed in detail there.

He admitted that the bank is facing various challenges including liquidity crisis.

It is reported that the bank has been in loss for the past few years and the loss in 2023 will be Tk 56 crore 50 lakh. Even ICB Islamic Bank has failed to declare dividend for a long time due to losses.

According to the latest data, the bank's deposits at the end of 2022 were Tk 1,212 crore, of which frozen deposits were Tk 444 crore.

Frozen deposits are Oriental Bank deposits, which were originally held by the central bank. The frozen deposit of the bank was Tk 2000 crore and so far about Tk 1500 crore has been paid to the depositors of Oriental Bank.

The bank originated in 1987, when it operated under the name Al-Baraka Bank. In 1994 it became a 'troubled bank'. Bangladesh Bank then introduced the practice of appointing observers to the faulty banks to restore order in the banking sector.

Then in 2004 it started operations as a commercial bank named Oriental Bank.

However, in June 2006, the Central Bank dissolved the Board of Directors of Oriental Bank after widespread irregularities were detected. 34 cases were filed in 2005 and 2006 alleging embezzlement of approximately Tk 34 crore from Oriental Bank.

Bangladesh Bank then took full control of it and an Executive Director of the Central Bank was appointed as the administrator of the bank to safeguard the money of the depositors.

In August 2007, Bangladesh Bank invited tenders to sell most of the bank's shares. Then two bidders participated in the tender with the Swiss ICB Group, which operates banking business in Asia and Africa.

In 2008, the name of the bank was changed to ICB Islamic Bank.