State-owned BASIC Bank and Rajshahi Krishi Unnayan Bank (Rakub) have requested clarity from the finance ministry regarding their proposed mergers, following significant deposit withdrawals after the merger announcements, leading to instability in both institutions. In early April, BASIC Bank witnessed withdrawals amounting to Tk2,500 crore ($215 million) post the merger news.
This substantial outflow, initiated by government entities and private depositors, resulted in a statutory liquidity reserve (SLR) deficit of Tk1,800 crore ($180 million) for the bank. The managing director of BASIC Bank, Md. Anisur Rahman, expressed concerns about potential check dishonors and loss of public trust without swift government intervention.
Similarly, Rakub expressed reluctance to merge with Bangladesh Krishi Bank (BKB) due to concerns about BKB’s weaker financial health. Nonetheless, BKB’s board approved the merger at the end of April to enhance service and reduce costs in the Rajshahi and Rangpur divisions. Rakub’s managing director, Niranjan Chandra Debnath, aims to achieve financial stability by June 2024 through improved banking practices.
These mergers, initiated by Bangladesh Bank in March, include ten private and state-owned banks with the goal of strengthening governance and reducing bad loans by merging weaker banks with stronger ones.
Bangladesh’s Banking Sector Crisis
Bangladesh’s banking sector is grappling with a liquidity crisis exacerbated by poor management and significant bad loans. International bodies like the IMF and the World Bank have raised concerns about potential bank failures, prompting the need for drastic consolidation measures.
While experts like Mustafa Kamal Mujeri view mergers as a positive step, they stress the necessity for broader reforms to address fundamental issues within the banking system. As these mergers unfold, the stability of Bangladesh’s financial sector and the trust of its depositors hang in the balance.