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Bank & Finance - 4 weeks ago

Bank merger will seriously affect common people

Zarif Mahmud : Bangladesh Bank plans to merge strong banks with weak banks. In the meantime, Shariah-based Exim Bank has signed an agreement in the presence of the Governor to merge Padma Bank, which is vulnerable to various irregularities.
However, development and economics researcher Professor Zia Hasan has identified six weaknesses in the central bank’s plan to merge banks. At the same time, this economist also thinks that the bad assets or bad debts of weak banks can be imposed on tax payers or poor people.
He gave this opinion in the webinar titled ‘Impact of Bank Merger in Distressed Banking Sector’ organized by Forum for Bangladesh Studies.
Fahmid Khatun, International Director of Sydney Policy Analysis Center Economist Jyoti Rahman, Economist and ILO South East Asia Regional Chief. Niaz Asadullah, researcher Mahmudul Hasan and others.
Professor Zia Hasan said that the decision of bank merger is good. But in this case, the weak bank should have been merged with the weak bank. Similarly, merging good banks with good banks. Now, if a weak bank is merged with a good bank, there is a danger that its (good) condition will also deteriorate. Bad banks have many liabilities. Padma Bank has bad loans of Tk 3500 crore. Bad assets or bad loans of weak banks can ultimately be passed on to tax payers or poor people. Without inflation, the country’s economy will not be able to take such a large amount of responsibility.
He said that the central bank has taken a policy to reduce defaults and restore good governance in the banking sector. But the main crisis of the bank is the influence of defaulters due to irregularities and looting and not taking any steps to control defaulters. It can be seen that the central bank is in a strict position in the proposals coming to control defaulted loans. The responsibility of these debts will be imposed on the poor through a unified imposition. There is a possibility that Sabol Bank will become weaker due to the combination of strong with weak. Bangladesh Bank has taken a strategy to hide defaulted loans. Now comes the merger again. According to the data, Bangladesh is in the third position for hiding defaulted loans. Banks’ crisis due to defaults. A liquidity facility of Tk 13 lakh crore has been provided in the financial year 2022-23. This is due to defaulted loans.
This researcher of development economics said that there are six weak points in the central bank’s bank merger. There is no preparation of Bangladesh Bank, here the central bank has broken its own law. Reducing the number of banks cannot be a viable goal, consolidation should be the main goal. Bad assets or bad loans of weak banks can ultimately be passed on to poor people. As a result, inflation will increase. Again, a bank without similar product portfolio and geographical diversification has no strategic value.
Professor Zia Hasan also said that three and a half thousand crore rupees have become bad loans in Padma Bank. Without inflation, the economy will not be able to take on such a large amount of debt. Banks in Bangladesh are more when compared to GDP, it is right. However, this means that the proposal to reduce the number of banks again cannot be logical. Fahmida Khatun, Executive Director of CPD, said in the webinar that the ongoing crisis in the banking sector includes liquidity crisis, capital crisis, poor asset management crisis and the gradual decline in credit quality has an effect on the country’s economy. has Due to this, the demand for reforms in the banking sector has been created long ago. If it is delayed every day is harmful to the country’s economy. Bangladesh Bank has developed a roadmap for bank consolidation. As part of this, as many as 10 weak banks can be merged with good banks. As part of that, Padma Bank and Exim Bank have been merged. As we learn, good banks are worried. Because there are good banks, they have become good banks by following the rules and regulations, complying with compliance, overcoming various kinds of adversities. Many are concerned about the merger of bad banks with good banks.
He said, the amount of loan defaults of weak banks, their position is bad in all indicators of management. The defaulting loan is the most worrying thing. How many of them actually default loans? Actual default loan print is not in their account. As reported, there will be more. This is expected.
Fahmida Khatun raised the question of who is the real weak bank and said that the weak banks of influential people may be excluded from this list. Liquidity crisis, technology, financial risk, asset management, human resources are very important in bank margin. Because these things are not the same in two banks. In 2009 Bangladesh Shilpa Bank merged with Bangladesh Shilpa Credit Corporation. Merged to become BDBL. Even after getting a new entity, the bank is now reeling under the burden of bad loans. Padma Bank was in red zone, Exim Bank was in yellow zone. The question remains how two bad banks will merge to become a good bank.
Economist Jyoti Rahman said that the central bank’s merger plan did not deal with the main problem. Who will take responsibility for bad assets of weak banks? If the central bank takes responsibility, then the responsibility will fall on the people. This would be a grave mistake. Everyone, including the IMF, says bad loans are increasing in banks. The government licensed several banks after coming to power. The bank crash did not happen overnight, it was a long time coming. Padma from Farmers Bank. The owner of Oriental Bank was sentenced to 13 years in prison due to irregularities. He is also working on big projects of the government. Its responsibility also falls on the people.
Monir Haider said that the merger was done before. BCI Bank was created during the Ershad period. After that we looked at the state of the banking sector. Eight banks are now in the red zone, followed by the latest Padma Bank merger deal. The merger of Padma Bank was forced. What will be the result, what is the benefit of merging the sunken banks? It doesn’t seem to be of any use.

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