The Centre for Policy Dialogue (CPD) on Saturday welcomed the central bank’s decision to merge weak banks with strong ones, deeming it a positive move overall.
“We think there is a need for this merger, for this consolidation. However, to reap the benefits of this initiative, the underlying causes behind the banks' deterioration should be identified and addressed,” said Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD).
He made the remarks during a press conference convened by CPD to discuss its recommendations regarding the national budget for the fiscal year FY2024-25. At that time, CPD Executive Director Fahmida Khatun presented several recommendations to reflect on the budget.
Mustafizur Rahman said, “There were several logical reasons behind the weakening of several banks. They had major weaknesses in management. It is essential to establish good governance and ensure prudent lending practices post-merger.”
In the question and answer session of the program, the CPD fellow said, “Before the approval of nine banks of the fourth generation, it was recommended to give the license to the new banks based on research and evidence.”
“There was a concern about whether the current economy of Bangladesh would be able to accommodate all these banks or not. It was also feared that the banks would face problems if they could not do business, including deposit collection and lending. Later, these fears unfortunately came true, and several banks were marked as weak, leading to the Bangladesh Bank move for initiating a merger of these banks," he said.
Acknowledging the need for this merger, he said, “It would be good for our banking system if we could do this on the basis of evidence. And it will be good for the economy.”
Airing a warning, he also said the main purpose of this merger should be eradicating the reasons why the banks have become weak.
“The strong bank which is being merged with a weak bank should not fall into the situation of the latter,” Mustafizur Rahman voiced a cautious warning.
“Through assimilation, the strong banks should ensure strong positions through good governance, proper management," the CPD fellow added.
Fahmida Khatun, CPD Executive Director, presented three specific recommendations for the forthcoming budget, focusing on enhancing food production, bolstering social protection, and effectively managing subsidies in key sectors like agriculture, energy, health, and education.
