Islamic banks’ deposits rise, but market share falls

Deposits in Islamic banks posted a modest rise, but their share in the whole banking system experienced a 1.17-percentage-point year-on-year fall in June 2025, according to Bangladesh Bank data.

The Islamic banking system experienced a 2.67 percent year-on-year rise in deposits as of the sixth month of 2025, hitting Tk 4.52 lakh crore.

But the share of their deposits in the banking system declined to 22.37 percent in June from 23.54 percent in the same month a year earlier, as per the central bank's Islamic Banking and Finance Statistics (IBFS) report for June 2025.

Moreover, the growth in deposits was much slower compared to that of the conventional banking sector.

The BB report said governance issues in some Islamic banks, which came to light after the July uprising, eroded public confidence and prompted depositors to shift funds away from these lenders to conventional ones.

Overall, deposits in the banking sector increased from Tk 18.71 lakh crore in June 2024 to Tk 20.22 lakh crore in June 2025, posting a growth of 8.04 percent.

Conventional banks posted stronger gains, with deposits rising from Tk 14.31 lakh crore to Tk 15.69 lakh crore over the same period, a jump of 9.69 percent.

The conventional lenders are capturing a larger share of new deposits thanks to stronger governance, wider branch networks, and more attractive deposit products compared to Islamic banks, the BB report noted.

A similar trend, though on a smaller scale, was observed in the non-bank financial institution (NBFI) sector. Total deposits there stood at around Tk 51.8 thousand crore in June 2025, nearly 1 percent higher than in May 2025.

Islamic NBFIs, however, logged 2.45 percent growth during the same period, taking their deposits to Tk 3,800 crore.

Islamic NBFIs accounted for 7.23 percent of total NBFI deposits in June 2025, a relatively small portion compared to their conventional counterparts.

Among them, full-fledged Islamic NBFIs captured only 33 percent of the share, while the rest was held by Islamic branches or windows of conventional NBFIs.

Mudaraba deposits dominated the Islamic NBFI segment, making up about 99.22 percent of all deposits.

The private sector contributed the largest share to these deposits in June 2025, the report added.