City Bank interested in merger with BASIC Bank to leverage special incentives

The central bank has announced a slew of special facilities for the strong banks that will acquire weak ones

Privately owned City Bank has shown interest in acquiring state-run BASIC Bank to get special facilities announced by the central bank for mergers in the sector.

Mashrur Arefin, managing director of City, told http://bdnews24.com on Monday that they were exploring merger possibilities because a stronger entity would have more advantages if it independently pursued an acquisition.

Bangladesh Bank Governor Abdur Rauf Talukder met with City Bank Chairman Aziz Al Kaiser and discussed the possible merger. The central bank is also supporting City’s plans.

"Initially, our strategy is to revitalise the weak bank, followed by the consolidation of balance sheets over a period of three years or more," Mashrur explained, referencing the central bank's newly released guidelines for mergers.

“I hope we will additional facilities if these three years pass well. We’re currently analysing the weak banks,” he said.

A top central bank official said Governor Rauf held a meeting with BASIC Bank Chairman Abul Hashem around a month ago to discuss the possibilities of a merger with another state-owned entity.

But BASIC sought help to ease its liquidity crisis. All but six of 107 branches of the bank are making profit after turning around from scams. But offering high interest on deposits hit the bank’s liquidity hard.

Officials said the initial plan was to merge BASIC with Sonali Bank or Agrani Bank, but Sonali on Monday approved the acquisition of Bangladesh Development Bank Limited.

BASIC Bank Managing Director Anisur Rahman’s tenure ended on Mar 31 amid discussions over mergers. Now Deputy Managing Director Abu Md Mofazzal is acting as MD.

Mofazzal said the central bank did not call him to discuss the merger on Monday.

Bangladesh Bank spokesman Mezbaul Haque said the central bank will act as a mediator if the banks agree to merge in line with its guidelines.

“Discussions about many banks are on. The banks will be selected after decisions taken by the boards of directors,” he said.

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, according to the guidelines.

Padma Bank, sunk in scams and huge non-performing loans, was the first to get the approval for a merger with Exim Bank.