BB rolls out alternative liquidity facility for Islamic banks

Bangladesh Bank has introduced a new financial instrument, namely, the ‘Islamic Banks Liquidity Facility (IBLF)’ for shariah-based banks in a bid to help them tide over temporary liquidity shortages.

The BB issued a circular in this regard on Monday.

“To aid the liquidity management and deepen the financial system, Bangladesh Bank is hereby introducing a new financial instrument, namely, ‘Islamic Banks Liquidity Facility (IBLF)’ for the shariah-based banking system in Bangladesh,” said the BB in the guidelines and operating procedures of IBLF.

This facility will provide short-term liquidity in the shariah-based banks operating in Bangladesh.

Shariah-based banks maintaining current accounts with Bangladesh Bank are eligible to participate in the IBLF.

The IBLF is a framework of providing liquidity facility by BB to shariah-based banks under the Mudarabah contract where Bangladesh Bank acts as the Investor (Rab al-Mal) and banks act as the investment manager (Mudarib) under an agreed Profit Sharing Ratio (PSR).

The applied amount of IBLF should be for a minimum of Tk 1 crore and the tenor of the IBLF will be 14 days, according to the BB guidelines.