Highlights:
The government will issue shariah-based short-term bills at the beginning of 2026, for the first time in the country. For this purpose, Bangladesh Bank is working on how the government will raise funds from investors.
On the 11th of this month, a policy decision regarding this matter was taken at a meeting of the Cash and Debt Management Committee (CDMC) under the Finance Division of the finance ministry. A senior official of the finance ministry who was present at the meeting confirmed this information to The Business Standard.
The tenure of shariah-based short-term bills is generally less than one year. Therefore, plans have been taken to introduce shariah-based short-term bills of three months, six months and one year.
These bills will be issued against social development projects. When the government decides to issue bills or bonds, the central bank is responsible for formally releasing them to the market. Through issuing bills and bonds, Bangladesh Bank raises funds from the general public, banks, insurance companies, financial institutions and other entities.
Economists and bankers say these shariah-based bills are good for the economy because they will create an investment avenue for those who follow Islamic shariah-based principles. And because these are short-term, investment in this sector is likely to increase.
There had been a kind of mistrust regarding shariah-based banks in the country, especially because customers of the five Islamic banks that were set to be merged could not withdraw their deposits on time. Later, customers withdrew deposits from shariah-based banks. Many depositors still have outstanding dues.
For this reason, as an alternative sector, these shariah-based short-term bills will create a new investment avenue.
Zahid Hussain, former lead economist, World Bank Dhaka office, said, "A large portion of the population in the country believes in Islamic shariah-based philosophy. This sector will benefit them greatly. There has been a crisis of confidence in the Islamic-oriented banks, and this crisis has had a significant impact on the economy. Customers had deposited money in the five banks because they trusted them, but due to irregularities, the customers could not withdraw their money on time. Once Islamic bills are introduced, a new investment sector will be created."
He added, "Traditional banks can invest in different sectors but shariah-based banks cannot do so. Therefore, a new sector will open up for Islamic banks. Along with them, shariah-based financial institutions and insurance companies will also be able to invest in this new sector."
Merged banks to get the opportunity to invest in these bills
Once these bills are introduced, a new investment sector will open for shariah-based banks. The newly merged bank formed from the five banks will also benefit. A former managing director of an Islamic shariah-based bank believes this will give them an opportunity to earn profits by investing in a new sector.
He said that if Islamic-oriented banks cannot distribute loans, they have limited avenues for investing their funds elsewhere. While traditional banks can invest in treasury bills and bonds, Islamic-oriented banks cannot. Once these bills are introduced, Islamic-oriented banks will have another option because they will be able to invest depositors' funds in these bills.
A large portion of traditional banks' income now comes from investments in treasury bills and bonds.
He added that most banks now earn income from non-operating sources, such as investments in bills and bonds.
A senior official of the central bank said that this initiative is being taken because there is market demand for these shariah-based Islamic bills. Therefore, it is expected that the bills will be introduced before next year's Ramadan or during Ramadan.
He said that individuals, banks, financial institutions, insurance companies and any other entity will be able to purchase these bills. The decision to introduce such instruments has been made precisely because there is demand in the market for this type of bill.
To raise funds, the government first introduced Islamic bonds in late 2020. Afterwards, Bangladesh Bank issued two more sukuk — in December 2021 and in the first half of 2022. Through these, shariah-based banks and the Islamic banking windows of commercial banks were able to invest in these government securities.
A senior official of Bangladesh Bank said that traditional banks can invest in repo, treasury bills, bonds and other government securities issued by the central bank, but Islamic-oriented banks cannot. Therefore, these bills will serve as a new investment sector.
Investment in treasury bills, bonds boosted profits for traditional banks
A large portion of traditional banks' income now comes from investments in treasury bills and bonds. At the beginning of 2025, the outlook for Bangladesh's banking sector appeared bleak — deposit interest rates were rising, inflation persisted, loan demand slackened, margins were squeezed, and political uncertainty raised fears of an earnings slump.
But the opposite happened. Private banks' profits not only held up but grew — especially in those considered "good players". The reason was not loan expansion or new business success but the substantial income earned from government bonds and treasury bills. Government securities have effectively become the new lifeline for banks, transforming the balance sheets of the entire sector.
The change was striking in the case of BRAC Bank. Between 2020 and 2022, the bank's investment income was between Tk700 crore and Tk800 crore, but in 2024 it rose to a record Tk2,880 crore — almost a four-fold increase in just two years.
Investment income grew 67% in 2023 and a further 127% in 2024, far exceeding the bank's income from loan interest or other fees.
In the first nine months of 2025, the bank's net profit rose 50% year-on-year to Tk1,553 crore. However, during the same period, net interest income (the difference between loan and deposit interest) fell by about 7%, or Tk100 crore.
In other words, income from treasury investments kept the bank's earnings afloat.
Like BRAC Bank, City, Dutch-Bangla, Prime, MTB and Eastern are also earning income through investments in treasury bills and bonds.