After Padma Bank merged with EXIM Bank last month, two more banks — Bangladesh Development Bank Limited (BDBL) and Rajshahi Krishi Unnayan Bank (RAKUB) — are set to merge with two other banks Monday as part of disciplining the banking sector.
BDBL will merge with Sonali Bank PLC and RAKUB with Bangladesh Krishi Bank. Separate memorandums of understanding (MoU) will be signed at the Bangladesh Bank (BB) headquarters on Monday.
The central bank informed the government about this decision last Wednesday. The chairmen and managing directors (MD) of these four banks were also informed that day.
The decision was taken at a meeting chaired by BB Governor Abdur Rouf Talukder and attended by high officials of BB and the four banks at the central bank.
It will be the second such experience for BDBL, which was formed out of the merger of two state-run lenders — Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangstha — 14 years ago as these two banks were suffering from huge default loans.
The merger and acquisition of the four banks have come as these lenders are continuing to struggle to limit bad loans.
As of December 2023, Sonali Bank had loans of Tk 93,096 crore. Of that, Tk 13,150 crore had turned bad, which was 14.1 per cent of the total credits disbursed, according to BB data.
Rakub saw Tk 1,334 crore become bad loans, accounting for 18.58 per cent of Tk 7,178 crore loans given out as of last year, according to the central bank.
After the signing of the MoUs, the board of directors of these four respective banks will start their operation to merge following the banking merger policy issued recently by BB, which highlighted that no bank can sack their employees three years after the merger.
According to the policy, after three years, a decision can be taken about the employment of the officers based on their performance evaluations.
It said that after the merger the MD, additional MD and deputy MD of the weaker bank will lose their posts. However, the acquiring bank can appoint them to suitable posts if it wants.
The directors of the merged weak bank will be disqualified from the post for five years. After five years, the new directors of the acquiring bank can be elected following the prevailing rules and laws, as per the policy.
In December last year, the central bank issued the Prompt Corrective Action (PCA) framework to deal with weak banks, effective from March 2025. Under the framework, banks will be categorised into four groups.
EXIM Bank and Padma Bank signed a MoU to open the process of merger on March 18. It was the first merger of two banks in the country after BB’s recent initiative to merge weaker banks with sound or strong ones.
Padma Bank has defaulted loans of around Tk 4,000 crore and the liability of government banks is about Tk 3,000 crore with Padma.
