Islamic banks fall behind in deposit growth

Conventional banks outperformed Islamic banks in deposit collection, investment, and asset growth over the past year, mainly due to instability in the Islamic banking sector following the July 2024 uprising.

According to a recently released report by the Bangladesh Bank, deposits in conventional banks rose from Tk 15.22 lakh crore in April 2025 to Tk 17.16 lakh crore in April 2026, marking a year-on-year growth of 12.73 percent.

In contrast, deposits in Islamic banks increased from Tk 4.41 lakh crore to Tk 4.81 lakh crore over the same period, showing a moderate growth of about 8.98 percent.

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“This steady growth in deposits in conventional banks can be primarily attributed to an unstable situation in the Islamic banking sector after the July 2024 uprising, which shifted depositor confidence towards conventional banks,” the BB report said.

The report added that following the July uprising, BB’s measures -- such as providing liquidity support, identifying weaknesses in banks and appointing administrators to improve management -- may help restore depositor confidence.

It also found that depositors mainly rely on Mudaraba-based deposits, which account for around 87.21 percent of the Islamic banking deposit base. As of April 2026, the deposit base is largely driven by the private sector, which makes up about 90.2 percent of total deposits.

In terms of assets, conventional banks recorded stronger and more consistent growth over the same period. Their assets rose from Tk 32.93 lakh crore in April 2025 to Tk 37.78 lakh crore in April 2026, a year-on-year increase of about 14.72 percent.

Islamic banks’ assets grew more slowly, increasing from Tk 9.14 lakh crore to Tk 9.56 lakh crore over the same period, reflecting a 4.58 percent rise.

The overall banking sector in Bangladesh saw strong investment growth between November 2023 and April 2026, with total investments increasing from Tk 18.99 lakh crore to Tk 24.45 lakh crore, a rise of 28.71 percent.

Within this, investments by conventional banks grew from Tk 16.73 lakh crore to Tk 18.53 lakh crore between April 2025 and April 2026, an increase of 10.71 percent.

Islamic banks’ investments rose from Tk 5.57 lakh crore to Tk 5.92 lakh crore over the same period, reflecting growth of about 6.26 percent.

“The year-on-year growth indicates gradual expansion, supported by rising demand for Islamic financing products, especially profit-and-loss sharing modes,” the report said.

From a sectoral perspective, the report added that Islamic banks’ investments were distributed across different areas of the economy, with the largest share going to industry and trade and commerce, highlighting their role in supporting productive and commercial activities.