Bank Merger: Commoners will have to pay consequence: Experts


Staff Reporter :
The ongoing bank mergers in Bangladesh have raised concerns among experts and analysts, who foresee potential unintended consequences for ordinary citizens.

Economists caution that these mergers might lead to undesirable outcomes, including an uptick in inflation and public debt, placing additional strain on the general populace.

The worry stems from the anticipated necessity for the central bank to resort to printing more currency or issuing fresh bonds to facilitate these mergers.

Speakers at a recent webinar organised by the Forum for Bangladesh Studies highlighted that the banks slated for potential mergers are already grappling with challenges such as insufficient capital, elevated levels of non-performing loans, and liquidity constraints.

There’s a palpable fear that integrating these weak institutions with stronger ones might destabilise the entire banking sector, potentially eroding public trust and confidence in the process.

An alternative solution to the challenges facing Bangladesh’s banking industry was proposed by Dr. Zia Hasan, a prominent economist.

Rather than pursuing mergers and acquisitions, Dr. Hasan advocated for the establishment of “super banks,” offering a more sustainable approach to revitalising the sector.


At a recent event attended by distinguished figures in economics and international affairs, including Dr. Fahmida Khatun, Executive Director of the Centre for Policy Dialogue (CPD); Jyoti Rahman, economist and international affairs director at the Sydney Policy Analysis Centre in Australia; and Dr. Niaz Asadullah, head of Southeast Asia at the Global Labour Organization, significant proposals were discussed to address the industry’s challenges.

Dr. Hasan’s proposal centred on the creation of three distinct “super banks” tailored to specific needs within the banking sector.

The first super bank would consolidate Islamic or Shariah-based weak banks, addressing the unique concerns of this segment.

Following this, a second super bank would amalgamate struggling general banks, while a third super bank would merge all state-owned commercial banks.

Dr. Hasan emphasised that this strategic restructuring would offer a more effective solution compared to the prevailing trend of merging weaker banks with stronger ones, which he believed could harm the economy.
The Centre for Policy Dialogue’s (CPD) Executive Director, Dr. Fahmida Khatun, highlighted that one of the major concerns now is credible data about the non-performing loan.

Economist Jyoti Rahman said that the central bank’s merger plan did not deal with the main problem. Who will take responsibility for the bad assets of weak banks? If the central bank takes the responsibility, then the responsibility will fall on the people. This would be a grave mistake. Journalist Monir Haidar moderated the webinar.