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Bank & Finance - 4 weeks ago

Bank merger: ‘No’ to 4 of 5 weak banks

Mohiuddin Farazi: Recently, Bangladesh Bank took the initiative of merging weak banks with strong banks to restore stability in the banking sector. There was also a series of announcements to merge the five weak banks with the five good banks. But except the sinking Padma Bank, the remaining four weak banks are against the merger. Two of them rejected the decision. The officers of a bank went down to the street. Officials of another bank are also angry.
Meanwhile, at least 24 banks, including BASIC, Padma, Exim, BDBL, Pubali, AB Bank, Janata, have abnormally reduced their capital in the past one and a half months after the announcement of the merger. In total, customers have withdrawn additional deposits of around Tk 30 thousand crores.
Policy Research Institute of Bangladesh executive director Dr. Ahsan H. Mansoor told that ‘Bangladesh Bank is in a hurry to merge. This has created panic among depositors, stakeholders, bankers and managers. If not properly integrated, confidence in the banking sector will decrease, customers will withdraw money. The entire banking sector will be in danger.
Former Professor of Economics Department of Chittagong University Mainul Islam said, ‘The panic is spreading due to forced bank merger. It is not working well at all.’
According to the announced decision, Padma Bank with EXIM Bank, National Bank with United Commercial Bank (UCB), BASIC Bank with City Bank, Rajshahi Krishi Unnyan Bank (RAKUB) with Bangladesh Agricultural Bank and Bangladesh Development Bank (BDBL) with Sonali Bank. According to the central bank’s merger policy, managing directors (MDs) and deputy managing directors (DMDs) of the merged weaker banks will lose their jobs.
According to sources concerned, the central bank has announced the merger without any approval from the authorities of BASIC, National and BDBL banks. In this, customers in all weak banks have started scrambling to withdraw their deposits.
Bankers are worried about jobs. Considering the situation, Bangladesh Bank has also backed off from the announcement of a new merger. But it did not restore confidence among customers and bankers. In this regard, the Chairman of the Board of Directors of National Bank, Syed Farhat Anwar told, “National Bank is a well-organized bank. Due to the dominance of a particular family, large debts of some branches were not being collected. To ensure the safety of the customer’s money, I took responsibility after dissolving the bank’s board. Now there is no authority in that family. Out of the nearly 300 branches and sub-branches of the bank, all but a handful of 11-12 branches are profitable. The collection of defaults has also increased. Integration can be done over time rather than integration at this stage.’
Basic Bank Deputy Managing Director (MD) Abu Md. Mofazzal told, “Various institutions have already withdrawn deposits of more than Tk 2,000 crore due to the news of merger with private banks. Bank officials are also scared. How will they integrate into private banks? For this, the board of the bank has decided not to merge. Bangladesh Bank announced the merger without the approval of the board of directors. I have given a protest letter for this.
Meanwhile, after the decision to merge with Bangladesh Agricultural Bank, the officers and employees of Rajshahi Agricultural Development Bank protested in the capital and Rajshahi. Apart from this, an official of BDBL Bank said on condition of anonymity, ‘Why should we take responsibility for the default of Sonali Bank? They have various scandals with hallmarks. Apart from these, there will be trouble with promotion and posting. They will take chances. There will be injustice.
The merger of Exim Bank with Padma Bank was first announced on March 14. Regarding the situation after that, the chairman of Bangladesh Association of Banks (BAB) and the chairman of Exim Bank said. Nazrul Islam Majumder said, “In the beginning, there was fear among the entrepreneurs regarding the bank merger. That’s a bit of a cut.
However, there are fears of bankers losing their jobs and depositors losing their savings. Despite our assurance, many people are withdrawing money from the bank out of fear. It used to happen to me too. Banks are trying to handle the situation. The central bank should play a strong role. Spokesperson and Executive Director of Bangladesh Bank Majbaul Haque said bank merger is an ongoing process. The central bank has the power to force a bank to merge if it is not willing. But that is not being done now.
10 banks including National have shown interest in voluntary merger. None of these banks will merge if they are good. Even if all banks are good, none of the banks can be consolidated. The former governor of Bangladesh Bank Dr. SalehuddinAhmed told, “Bank merger is a complicated issue. It does not mean one bank buying another bank. Merger has to be done with the consent of the two banks. This requires a detailed audit. Time must be given. Freedom must be given. If forced, it will not merge. That would be purchase or possession. The central bank should make the right policy of consolidation. Failure to do so may lead to instability and chaos in the entire sector. This will scare the customer. Bankers should be guaranteed employment. But the central bank is not doing that.

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