State-run banks to cut to two after Tk 3 lakh crore drain, seven to merge: BB boss

The interim government plans a major overhaul of the banking sector by retaining only two state-owned banks and merging the remaining seven, Bangladesh Bank Governor Ahsan H Mansur has said, citing years of mismanagement and weak governance.

Bangladesh has nine state-owned banks and a total of 61 banks overall – a number the governor said is excessive for the country’s needs.

He said 10 to 15 banks would be sufficient, arguing that consolidation is essential to ensure accountability and improve governance.

Six of the nine state-owned banks are commercial lenders – Agrani Bank, Pubali Bank, Sonali Bank, Janata Bank, BASIC Bank, and Bangladesh Development Bank – while three are specialised banks: Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and Probashi Kollyan Bank.

Ahsan H Mansur has said that around three lakh crore taka has been laundered from the banking sector due to governance failure and lack of checks and balances. He said that the governance system of the bank has been destroyed due to illegal lending on the instructions of individuals and the government.

He said these things while delivering a public lecture titled ‘Banking Sector: Current Status and Future Challenges’ at Jagannath University (JUB) at 10:30 am on Wednesday (January 21). The Bangladesh Economic Association and the university’s Department of Economics jointly organised the event.

The governor said that the biggest problem in the country’s banking sector is governance failure. Loans have been given on the instructions of the government and influential individuals or families. Behind this is the negligence of various institutions, including the Bangladesh Bank, which cannot be denied. The reason for the current plight of banks is that the ownership of the banks was controlled by individuals. For example, five Islamic banks were merged. All of them were under the control of individuals. As many as three lakh crore taka have left the country due to the lack of checks and balances in the banks.

Dr. Ahsan H. Mansur also said that the banking sector is in third place among the four sectors in the world. However, its position is first in Bangladesh. As a result, other financial sectors in Bangladesh are in a loss-making position. Now we have to bring it back to good condition. We have to work on this for a long time. Other sectors should be given priority along with the banking sector.

Regarding the number of banks, the governor said that it would have been enough to have 10 to 15 banks in the country, but currently there are 64 banks. Administrative complexity and costs have increased due to additional banks. Reducing the number of banks will reduce costs and increase profitability. He said that the income of a bank in Singapore is equal to the combined income of all banks in Bangladesh.

In his speech, Jagannath University Vice Chancellor Professor Dr Rezaul Karim said that the current governor has taken forward a ruined sector. The banking sector was ruined. We understand how fragile this sector is. Efforts are being made to fix it through various techniques. I hope that the positive trend of development that has come will continue.

Also present at the event were the convener of the Economic Association, Professor Dr Mahbub Ullah, member secretary Dr Mohammad Helal Uddin and others.