BASIC, Rakub seek govt decision on their merger

BASIC Bank and Rajshahi Krishi Unnayan Bank (Rakub), two stateowned banks, have reached out to the finance ministry, seeking clarification regarding the government's stance on their proposed merger with other banks.

They have expressed concern over the noticeable withdrawal of deposits following the announcement made early last month. Despite this, both banks have affirmed their willingness to adhere to the decision – whether it involves a merger or not, as will be instructed by the Financial Institutions Division on behalf of the government.

Earlier, the Bangladesh Bank said BASIC Bank will merge with City Bank, a private lender, and Rakub will merge with state-owned Bangladesh Krishi Bank (BKB).

Last week, BASIC Bank and Rakub separately wrote letters to the Financial Institutions Division, urging the government, as the owner of these banks, to clarify its stance on the proposed merger. In the letter sent to the Financial Institutions Department on 7 May, BASIC Bank said since the news of the merger of the government bank with a private bank on 8 April was published, the bank has plunged into a deep crisis due to abnormal withdrawal of deposits.

The letter, signed by BASIC Bank Managing Director Md Anisur Rahman, reads, "Depositors have already withdrawn around Tk2,500 crore. Various government offices, departments and agencies have sent letters to the bank to withdraw more deposits. In the present scenario, fresh deposits are not available from any other sources. Moreover, deposits are constantly being withdrawn at the individual level."

Due to the crisis of confidence created among the customers due to the news of the merger with the private bank, the statutory liquidity reserve (SLR) deficit of the bank stood at around Tk1800 crore, said the MD.

"There has never been any shortage of SLR or check dishonour in this bank. If the current situation doesn't improve soon, there's a risk of cheques being dishonoured in the future. This could totally damage public confidence in the bank," he said.

If this situation continues, the bank will soon fall into a deep crisis, which will have a negative impact on the entire banking sector, said the MD. "Apart from this, if the emerging situation is not handled properly, the payment of salaries and allowances to the officers and employees will face uncertainty."

The letter also reads, "Since the created crisis has gone beyond the control of the bank, it is not possible for

BASIC Bank to deal with the crisis alone, so the government needs to take immediate action in the situation."

The BASIC Bank MD suggested that the government send a clear message to various government agencies, assuring them that keeping deposits with the bank is safe and secure.

Besides, BASIC has sought policy support including the provision of deposits from the government at low interest along with the request to keep government deposits in the bank.

Rakub on 1 May sent the letter to Financial Institutions Division Secretary Sheikh Mohammad Salim Ullah and urged the finance ministry to decide on the merger taking into account its objections. The Financial Institutions Division, however, gave its consent regarding the merger in response to another letter sent by BKB.

The letter, signed by Rakub Managing Director Niranjan Chandra Debnath, reads, "The management expects that Rakub will achieve breakeven with improvements in all financial indicators by the June/2024 financial year-end.

But, Bangladesh Bank's clear directive is that Rakub and BKB should convene emergency board meetings, reach a self-initiated policy decision in favour of the merger, and notify the Bangladesh Bank accordingly."