The Board of Directors of National Bank Ltd (NBL) has decided that it will not merge with the United Commercial Bank (UCB).
NBL’s board made the decision at a meeting last Saturday, according to sources at the bank.
A board member, requesting anonymity, told The Business Post, “We have decided not to merge with UCB. NBL’s board was restructured recently by the central bank and it is trying to improve the bank’s health with the government’s help.
“That is why our Board of Directors thinks that it's not the right time to merge with another bank.”
Bangladesh Bank (BB) reconstituted the board of NBL, which was beset with irregularities, in December last year.
The NBL board member also said, “We are trying to comply with the rules and guidelines of the central bank. NBL has been suffering from a huge number of default loans and capital shortfalls. Our new board aims to improve the bank’s condition from this situation first.”
Replying to a question, he also said that the central bank wanted to merge NBL, which has 221 branches around the country, with UCB without any discussion with them.
“As this news spread around the country right before Eid-ul-Fitr, fear spread among our depositors and officials. That led to depositors withdrawing their deposits from NBL as well,” said the official.
According to BB data, NBL’s default loans stood at Tk 12,368 crore at the end of December last year. Moreover, its capital shortfall stood at Tk 608 crore at the end of September 2023.
Speaking on condition of anonymity, a director of UCB also told The Business Post, “The central bank tried to merge NBL with us and that news made our depositors anxious as NBL is suffering from many irregularities and default loans.”
A meeting on April 9, with BB Governor Abdur Rauf Talukdar in the chair, had decided that NBL would be merged with UCB. Senior representatives of both banks were present.
In December last year, BB issued a Prompt Corrective Action framework for the banking sector as it planned to merge some banks to resolve the financial sector crisis.
The central bank decided to merge weak banks with strong ones based on four indicators - defaulted loans, capital situation, management and liquidity situation. If there was no voluntary merger by December 2024, it decided that weak banks would be forcibly merged with stronger banks from March 2025.
On April 4, BB issued a policy on how to merge banks. However, a wave of uncertainty spread in the banking sector as it also decided to merge some banks without following this policy. The panic among bank officials and depositors since then has slowed down the merger process.
