Written by The Banking Post
Bangladesh Bank plans to introduce an Islamic interbank money market within the current fiscal year, aiming to provide Shariah-compliant banks with a structured mechanism to manage short-term liquidity.
Currently, Islamic banks cannot participate in the conventional call money market due to Shariah restrictions, leaving them vulnerable during liquidity shortages. The new system will allow these banks to borrow from one another, creating an alternative funding channel and improving efficiency in liquidity management.
Industry experts say the platform will give Islamic banks greater flexibility. Banks facing overnight deficits in current accounts will no longer have to rely solely on the central bank; they can source funds from peers to cover short-term gaps.
“If a bank’s current account suddenly turns negative, it can borrow overnight from another bank to restore a positive balance, significantly expanding its options,” said a bank managing director.
However, concerns remain for newly formed or financially weaker banks. A senior Bangladesh Bank official noted that institutions such as Sammilito Islami Bank may initially struggle to attract interbank loans due to doubts about repayment capacity and limited income streams.
Despite these challenges, bankers believe the system will enhance fund transfer flexibility among Islamic banks, offering a much-needed solution to liquidity pressures while adhering to Shariah principles.
