No more bank merger proposals for now: BDBL

Bangladesh Bank will focus on five merger or amalgamation proposals it has already received and not accept any other proposals for the time.

Among the five proposals, state-run Sonali Bank wants to acquire Bangladesh Development Bank Ltd (BDBL), and Bangladesh Krishi Bank (BKB) wants to take over Rajshahi Krishi Unnayan Bank (Rakub).

Additionally, City Bank, a private commercial lender, wants to acquire state-run BASIC Bank, while another private lender, United Commercial Bank Limited (UCBL), plans to buy National Bank.

Bangladesh Bank Executive Director and Spokesperson Md Mezbaul Haque told The Daily Star that the managing directors and chairmen of the banks had verbally informed the central bank about the planned mergers.

"These are voluntary merger proposals. The lenders will apply to the central bank formally after the plan is approved at their board meeting," he said. "We will work on the five proposals at this moment.

We will receive more proposals after completing the five proposed mergers," he said.

However, industry insiders said the merger plans were not voluntary and that sound banks were being forced to agree to take over weak banks.

The central bank has decided to merge weak banks with strong lenders as a part of its efforts to bring about reforms in the banking sector, as per conditions tagged with $4.7 billion-worth loans from International Monetary Fund (IMF).

The central bank issued comprehensive guidelines on mergers or amalgamations for banks and nonbank financial institutions (NBFIs) on April 4.

Earlier in March, Bangladesh Bank Governor Abdur Rouf Talukder formally informed the bank owners that they could decide to merge voluntarily within December.

Afterwards the central bank would decide which weak banks to merge with sound ones under a Prompt Corrective Action (PCA) framework, he added.

The PCA framework, which would help determine the health of banks, is scheduled to be implemented from March 2025, based on performance and financial indicators as of December 2024. A few days after the governor's announcement, Exim

Bank received its board's approval to take over struggling Padma Bank.

On March 18, both Exim Bank and Padma Bank signed a memorandum of understanding to initiate the process of merger in the presence of the central bank governor. If this comes about, the Padma Bank name will no longer exist.

At the end of last year, Padma Bank's outstanding loans amounted to Tk 5,740 crore, of which Tk 3,550 crore was defaulted.

On the other hand, Exim Bank saw about 3.5 percent of its total outstanding loans of Tk 46,937.63 crore turn sour.

On April 3, the primary decision for the acquisition of the BDBL by Sonali Bank and Rakub by the BKB was taken at a meeting between the Bangladesh Bank governor and the managing directors of the four state-run banks at the central bank headquarters.

On April 8, City Bank agreed to take over BASIC Bank following a meeting between the Bangladesh Bank and the managing director and chairman of City Bank.

A few days later, the primary decision to merge National Bank with the UCBL came following a meeting between the UCBL and central bank officials.