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The boards of the two banks have sanctioned the merger
Published : 08 Apr 2024, 08:50 PM
After the merger of privately operated Padma Bank and Exim Bank, state-owned Bangladesh Development Bank Limited is going to be merged with Sonali Bank.
The boards of directors of the two banks sanctioned the merger on Monday. Sonali Bank will proceed with the acquisition of BDBL once the Bangladesh Bank gives the go-ahead.
Md Habibur Rahman Gazi, managing director of BDBL, said: “The board has been informed about the Bangladesh Bank’s instructions on the merger today [Monday]. The board has agreed to the merger with Sonali Bank.”
“Now the Bangladesh Bank will be informed about the board’s decision. Then the procedure will go ahead in line with the Bangladesh Bank’s institutions.”
Amid growing bad loans and scams, economists have been saying for long that Bangladesh does not need so many banks. The central bank recently initiated the mergers of troubled banks with strong ones.
A bank will have to absorb accumulated losses and non-performing debts if it acquires a struggling one, but in exchange, it will enjoy special security provisions and other facilities.
The Bangladesh Bank unveiled a set of guidelines for bank mergers last week while also offering policy assistance.
The acquiring institution can operate under a new name or its existing name post-merger. The authorities will have to seek the central bank’s approval for a name change.
“The capital, liquidity and non-performing loan ratios of the acquiring bank may be affected after the merger,” the central bank said.
In case of compulsory merger, a tender must be published in newspapers to take over the liabilities and assets of the concerned banks following the decision of the Bangladesh Bank, the guidelines said.
If there is no response to the tender or if the central bank is not satisfied with the capability of the applicant, it can instruct any bank to take responsibility by bringing one or more banks under the scheme.
That means the central bank holds the right to instruct any bank to take over the responsibility of a weak bank. In this case, the bank will take the initiative to merge with any other bank or financial institution after receiving instructions.
Padma Bank, sunk in scams and huge non-performing loans, was the first to get the approval for a merger with Exim Bank.
The central bank also held a meeting with managing directors of the state-owned banks last week to inform them about the merger plans.
It was not specified who will be merged with whom, but the central bank said the banks will be able to choose the other entities for the mergers.
Upon getting hints from the government high-ups and the central bank, Sonali Bank officials made a summarised proposal by analysing BDBL’s financial report. It was presented in Monday’s board meeting.
Sonali Bank Managing Director Afzal Karim said: “The board of directors has approved the merger with BDBL. The formalities will be done through the Bangladesh Bank after Eid-ul-Fitr. We’ll strike a memorandum of understanding which will detail the process of the merger.”
BDBL itself was established in 2009 through the merger of Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangstha.
After a recent amendment to the Bank Company Act, BDBL, like others, took the PLC suffix in place of Limited.
Although the mergers are for weak banks to be acquired by strong ones, BDBL Managing Director Habibur said: “Our range is very small with only 50 branches across Bangladesh. It’s a weakness, but the main advantage of having fewer branches than others is that we don’t have loan scams. We’re making profit.”
With 1,232 branches, including two abroad, Sonali Bank is the largest commercial bank owned by the state.
Formed after independence by merging the National Bank of Pakistan, Bank of Bahawalpur and Premier Bank, more than 18,000 Sonali Bank employees now serve nearly 25 million customers.
Meanwhile, state-owned BASIC Bank, buried under scams, is reportedly being merged with private City Bank.
According to reports, Bangladesh Bank Governor Abdur Rauf Talukder held a meeting with City Bank Chairman Aziz Al Kaiser and Managing Director Mashrur Arefin on Monday.
But no sides officially commented on the matter.
