Will it beneficial
for the people?
Golam Mostafa Jibon:The government has planned to merge Bangladesh Development Bank Limited (BDBL) with the troubled BASIC Bank Limited in a view to bring overall improvement in the institutions.
Although, the issue of consolidation has not yet been finalized, experts have expressed doubts over the benefits of the merger as the financial conditions of the both banks are so weak.
Experts in the financial sector said that, if zero is added with zero, the result will be ‘big zero’. Similarly, if the BDBL and BASIC Bank are consolidated, the result will be zero.
Some people have said that, though the condition of two institutions is weak, it may however bring some benefits by their combined journey.
However, in order to get the benefits, the responsibility of the board of directors has to be handed over to the deserving people.
At the same time, skilled manpower must be ensured at all levels. Some are also advising to recruit qualified and skilled new manpower by giving some unskilled and inefficient manpower golden handshake (voluntary retirement) in necessary.
Insiders said, unification will not be the solution. The question is what will happen to the management, if it is integrated? Who will be in the new management team, results will depend on it. Many opined that, good results can be obtained by merging two weak institutions with two other good banks instead of merging between two weak banks.
In this case, the government will have to fill up the capital deficit of these two banks. Otherwise, no good organization will agree to deal with such weak organizations. Launched in 1989, BASIC Bank once was one of the best banks in the country. The bank was once even compared to the global giant Standard Chartered. But, the collapse began in 2009, when Abdul Hye Bachchu took over the reins of the bank. Between 2010 and 2013, the bank fell into the abyss due to fraud of more than Tk 4,500 crore. Since then, the government has not been able to improve the situation by injecting fresh funds to the bank through various ways.
In this situation, BASIC Bank has incurred a net loss of Tk 3,740 crore in the last eight years. Of which, the bank incurred a loss of Tk 366 crore in 2020 and Tk 326 crore in 2019.
The government has provided Tk 3,390 crore from the exchequer to the bank at different times. Even then, the one-time best bank has a capital shortfall of Tk 3,800 crore as well as a provision shortfall of Tk 3,288 crore. BASIC Bank, which operates 72 branches and 2,100 employees across the country, disbursed Tk 14,673 crore as loans and advances at the end of December 2020. Of this, 51 percent or Tk 7,502 crore has defaulted.
On the other hand, BDBL was established in 2009 by merging Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Sangstha (BSRS) and its started journey on January 3 in 2010. It is currently operating with six regional offices, 47 branches and 723 employees. The overall condition of this institution is not good.
At the end of December 2020, the amount of loans disbursed by the BDBL was Tk 1,756 crore. Of which, 33.88 percent or Tk 595 crore has defaulted.
Despite the situation, that institution does not have to bear the burden of losses like BASIC Bank. Last year too, the bank made a profit of around Tk 4.5 crore.
AB Mirza Azizul Islam, a financial adviser to the former caretaker government and a prominent economist said that, the merger of the two institutions may bring some benefits for the BDBL and BASIC Bank. Basically, if a weak bank merges with a strong bank, then the benefit is better. Still, I am a little optimistic. In Bangladesh, there is absolutely no such thing as merger. Earlier, Shilpa Bank and BSRS were merged. Then there were no more mergers. So, it may set a new example for merger.
When asked what steps should be taken to consolidate, he said, “Whatever the consolidated bank will be, there may be a need to change management if necessary. Good governance must be established there. Special care should be taken not to give loans for politically motivating or any other consideration. That means, a professional management has to be introduced.”
Salehuddin Ahmed, former Governor of Bangladesh Bank came with almost the same remarks. He said, “Both are in trouble. But both have a lot of infrastructure. BDBL has a huge building. Although, there are problems, if the two plan to do well together, take some good people, do some recovery, if they give good loans, then some benefits can be obtained.”
He further said, “The government will not be able to rescue the two in the current situation by providing capital. It should try to integrate. One section will see industrial loans and another will see small and medium loans. But the key is that the people on the board must be professional. At the same time the managing director or any other staff that will come, they have to be highly skilled. Among the old, there will be those who are skilled and responsible. The rest have to make proper arrangements.”
However, with a different suggestion, he said, “It would be better, if a good organization wants to take these two organizations. The government may try to merge with two better institutions. However, a good organization does not seem to take these two organizations. Because of there is a matter of liability of the two institutions.”
On the other hand, the Executive Director of the Policy Research Institute (PRI) of Bangladesh and Chairman of BRAC Bank Ahsan H. Mansoor completely disagreed with them.
He said, “There is no point in merging BDBL with BASIC Bank. Because, adding zero to zero is zero. Unification will not be the solution. The question is what will happen to the management, if it is integrated? Who will be in the new management team? The outcome will depend on these.”
“Both institutions have financial weaknesses and capital weaknesses. In this case, some workers have to be dismissed by the government with a golden handshake. Officers who are not qualified to be retained should be excluded. These have to be done through dialogue. However, there is an objection to be one of those with whom this discussion is going on. In particular, BDBL, which is in profit, has an objection to be one with BASIC, which is in loss incurring,” he added.
BDBL managing director (MD) Kazi Alamgir is very disappointed to hear the news of the merger with BASIC Bank. Because of under his leadership, the organization is currently in profit.
On the other hand, BASIC Bank is running at a loss. If integrated with such an organization, the path of improvement will be closed. If it has to be consolidated, it should be done with a good bank.
While asked, a director of BASIC Bank said that, he did not know anything about the discussion going on.
While contacted, Dr. Nahid Hossain, joint secretary of the Ministry of Finance said, “I don’t know anything about it. I can’t say anything, what I don’t know.”
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