Bangladesh Bank Governor Abdur Rauf Talukder has advised to take initiatives to merge weak banks with good banks. The central bank wants weak banks to begin merger talks with good banks now.
The governor made this suggestion in the bankers’ meeting held at Bangladesh Bank with the managing directors (MD) of the country’s public-private and foreign sector banks. This information was revealed by several sources present at the meeting. This meeting was held at the head office of Bangladesh Bank in Motijheel on Wednesday. Before this, the last bankers meeting was held last August. Yesterday’s meeting held after almost five months was attended by all the deputy governors and senior executives of the central bank.
According to the prothomalo
According to sources related to the meeting, Governor Abdur Rauf Talukder said in the meeting that 40 banks out of 61 banks in the country are in good condition. Of the remaining 8-10 banks may be merged. For this, he advised MDs of good and weak banks to start discussions among themselves.
After the meeting, Syed Mahbubur Rahman, MD of Mutual Trust Bank, told the reporters, now we have to start reforming the banking sector, there is no alternative. Weak banks should initiate merger talks with good banks. Such instructions have been given in the meeting.
As per the existing policy, business of weak banks will be restricted from March next year based on the current year’s financial data. Only then will the merger or acquisition process begin. Weak banks will be identified on the basis of capital adequacy, high non-performing loans, liquidity and good governance.
Meanwhile, after the suggestion of the governor to merge the weak banks with the good banks, the question has arisen among the bankers, why the good banks will take over the responsibility of the weak banks. If that happens, the financial indicators of good banks may also deteriorate. Again, what is the real financial picture of weak banks is not clear. Because, weak banks have many bad loans, which are beyond the account of defaulters.
Several MDs present at the meeting on condition of anonymity told Prothom Alo that the good banks will not take any initiative to merge the good banks at the moment. Because even good banks can get into trouble. No one seems to come forward in this regard until Bangladesh Bank gives specific instructions or policies in this regard.
After assuming office as governor on July 12, 2022, Abdur Rauf Talukder said in a press conference on August 3 of that year, 10 weak banks have been identified in the establishment of good governance in the banking sector. The progress of each bank will be monitored by a senior official of Bangladesh Bank.
List of weak banks from next year
After highlighting the main issues of monetary policy in the bankers’ meeting, there was a discussion about early and quick corrective measures in banks (PCA-Framework). The MDs present on behalf of Bangladesh Bank were informed that the banks whose actual non-performing loans are more than 5 percent and the capital reserve ratio (CRR) against risk-based assets is less than 12 and a half percent, those banks will be divided into four groups. The central bank can limit the operating expenses of such banks, distribute dividends, open new branches, close deposits and loan disbursement facilities. This policy will be implemented from March 2025 on the basis of the 2024 financial reports of the banks.
The Association of Bankers Bangladesh (ABB) chairman Salim RF Hossain told reporters after the meeting that the central bank has said to review the financial indicators of the banks every quarter. If someone is doing badly in the financial indicators, they are urged to improve. It was essential for the banking sector in the overall situation. This will restore stability in the banking sector.
After the meeting, the spokesperson of Bangladesh Bank, Mejbaul Haque, told reporters, “Bank merger and acquisition practice will start soon.” MDs of all banks have been asked to keep in mind what will be the consequences if the conditions are not fulfilled. Awami League’s election manifesto was also supposed to restore order in the financial sector. Bangladesh Bank is working accordingly. There will be new announcements about reducing defaulted loans and restoring good governance in the banking sector. If a bank cannot improve its situation, it will be merged or acquired.
New facilities are coming to solve the dollar-crisis
According to sources related to the meeting, it was announced in the meeting to take new initiatives to reduce the dollar crisis. The government is going to make a law that no one will question if any Bangladeshi brings any amount of dollars from abroad. Besides, the central bank will introduce the dollar-money swap system. Through this, the banks will be able to withdraw money by depositing the surplus dollars in the central bank. If necessary, the dollar can be returned by depositing money again.
If a customer deposits foreign currency in the bank, the interest rate has been increased from 7 to 9 percent. The bank’s MDs were told that information in the meeting. Besides, MDs were thanked by the central bank for reducing money laundering under the guise of import and export.
After the meeting, ABB Vice Chairman Masrur Arefin told reporters, “We are optimistic about the return of dollars to our domestic banks that are in different banks abroad. Those who have laundered money illegally will not bring back those dollars without legal assurance. However, if the foreign currency is deposited, the interest rate increases and the expatriates at the individual level will be interested in depositing dollars in the bank. Because, nowhere in the world is this 8 to 9 percent profit given against the dollar. Banks will soon hold road shows in countries and cities where Bangladeshis live more to collect dollars from expatriates. Many banks are working to launch special products and hotline services for this.