On the other hand, classified loans increased to 4.79 percent from 4.2 percent in 2017, weakening the health of Islamic banks.
The Islamic banks seemed to have been involved in aggressive lending as their advance deposit ratio climbed to 90.8 percent in 2018 -- which is beyond the authorised limit of 90 percent -- from 87.8 percent the previous year.
Though the overall banking sector was going through a tight liquidity, the market share of the Islamic banks improved to 8.54 percent in 2018 from 7.47 percent in 2017 in terms of excess liquidity.
The rising NPL was identified as a serious problem for the Islamic banking industry as well.
A lack of investment products for land purchase and home loan is hindering the investment of the industry, the report said.
“The Islamic banks should redesign their products to bring in more diversification.”
The Bangladesh Bank is working to strengthen the Islamic banking industry, said SM Moniruzzaman, a deputy governor of the central bank.
Shah Md Ahsan Habib, a director of the BIBM, urged the Islamic banks to put emphasis on compliance instead of growth.
The Islamic banks should operate under a central Shariah council, said Helal Ahmed Chowdhury, a supernumerary professor of the institute.
He emphasized on product diversification to make the Islamic banking popular among customers.