AS per media report Finance Minister AMA Muhith has made the point that merger of poorly run commercial banks with stronger ones makes sense when they are struggling to survive and crowding without enough businesses. The country has too many banks not even justified by the size of the economy. So the better way to manage the banking sector is to reduce the number and increase their business coverage.
We know banks were given licenses in the past in political consideration to expand party influence on the economy and businesses. In granting such approval, the Awami League government in recent past made most generous approval of banking licenses when indiscipline in loan approval and portfolio management have also spread to a new height at times threatening safety of depositors’ money.
The government in 2013 granted licenses to 13 banks, besides several insurance companies. Meanwhile many have grabbed money from state-owned banks and became owners of private banks. Speaking at the annual meeting of Sonali Bank the Finance Minister also mentioned the swindling of Sonali Bank, BASIC Bank and Agrani Bank; which was the most talked about issue in the country’s banking history. They lost over Tk 15000 crore in some estimates in bad and fake loans to big business houses against imaginary projects. Many are not repaying loans. Most of these banks are running clients windows now on regular budgetary recapitalization years after years.
We believe Mr Muhith’s remarks is most pertinent in this background and it may be advanced in all seriousness. Merger of banks is nothing new; it takes place anytime some banks feel insecure while others feel they are capable to integrate their capital and business to achieve higher business goals. India is currently merging some banks to bail out sick ones. What is important is that bank owners of poorly performing banks must realize that it is not essential to be owner of banks to take advantage of a big social identity as bank owners. Such narrow approach about banks is allowing them to take business contracts and fake loans from such banks or using their identity to take loans from other banks. But such practice is bound to make their own banks sick and the entire sector to face destabilization.
We know banks must be more institutional than they should represent certain persons or group of persons. They grow through corporate management. We are aware of the fact that many owners of recently approved banks have also taken loans against fake business projects and some of them behave like ones beyond accountability to any legal system using their political position in the government. Some more institutional cover to such banks will give them protection from any form of exploitation and save depositors money. Merge is a good proposition no doubt in our case.
We know banks were given licenses in the past in political consideration to expand party influence on the economy and businesses. In granting such approval, the Awami League government in recent past made most generous approval of banking licenses when indiscipline in loan approval and portfolio management have also spread to a new height at times threatening safety of depositors’ money.
The government in 2013 granted licenses to 13 banks, besides several insurance companies. Meanwhile many have grabbed money from state-owned banks and became owners of private banks. Speaking at the annual meeting of Sonali Bank the Finance Minister also mentioned the swindling of Sonali Bank, BASIC Bank and Agrani Bank; which was the most talked about issue in the country’s banking history. They lost over Tk 15000 crore in some estimates in bad and fake loans to big business houses against imaginary projects. Many are not repaying loans. Most of these banks are running clients windows now on regular budgetary recapitalization years after years.
We believe Mr Muhith’s remarks is most pertinent in this background and it may be advanced in all seriousness. Merger of banks is nothing new; it takes place anytime some banks feel insecure while others feel they are capable to integrate their capital and business to achieve higher business goals. India is currently merging some banks to bail out sick ones. What is important is that bank owners of poorly performing banks must realize that it is not essential to be owner of banks to take advantage of a big social identity as bank owners. Such narrow approach about banks is allowing them to take business contracts and fake loans from such banks or using their identity to take loans from other banks. But such practice is bound to make their own banks sick and the entire sector to face destabilization.
We know banks must be more institutional than they should represent certain persons or group of persons. They grow through corporate management. We are aware of the fact that many owners of recently approved banks have also taken loans against fake business projects and some of them behave like ones beyond accountability to any legal system using their political position in the government. Some more institutional cover to such banks will give them protection from any form of exploitation and save depositors money. Merge is a good proposition no doubt in our case.
