BB proposed keeping 2 state banks and merging others: governor
Bangladesh Bank has proposed that the government keep two state-owned banks and merge the others, said central bank governor Ahsan H Mansur.
Bangladesh currently has 61 banks, which is far more than necessary, and 10 to 15 banks would be sufficient for the country, he said.
For all latest news, follow The Daily Star's Google News channel. It would be easier to ensure good governance if the number of banks were reduced, the governor said while speaking as chief guest at a discussion titled “Banking sector: current challenges and future challenges”, held at Jagannath University.
Criminal activities, irregularities, family dominance, and weak governance have destroyed Bangladesh’s banking sector, Mansur further added.
Around Tk 3 lakh crore has flown out of the banking sector, a large portion of which was likely laundered abroad.
He also alleged that $20–25 billion was siphoned off through family control within banks.
The governor stressed that personal or individual-centric decisions must not be allowed to influence the banking sector.
“The sector has collapsed due to the absence of proper governance,” he said, adding that reforms are urgently needed in all areas of banking.
On non-performing loans, he said the default rate is expected to come down to 25 percent by March.
However, he warned that political interference could return to the banking sector if the amended Bangladesh Bank Order is not enacted.
The governor also said Bangladesh Bank is working to establish a Bank Resolution Fund, which will collect between Tk 30,000 crore and Tk 40,000 crore. The framework will cover not only banks but also non-bank financial institutions.
Emphasising the need for a cashless society, Mansur said cash is the main channel for revenue leakage.
“If a cashless system can be established, annual revenue collection could increase by Tk 1.5 lakh crore to Tk 2 lakh crore,” he said, urging that every student be brought under formal banking services.
Speaking as a special guest, Jagannath University Vice-Chancellor Prof Dr Rezaul Karim said the current governor has played a significant role in steering a nearly collapsed sector forward.
He said the fragile condition of the banking sector has now become clear.
Jagannath University’s Economics Department Chairman Prof Dr Sharif Mosharraf Hossain said the rising default loans have reduced banks’ capacity to disburse loans, which has in turn hindered investment.
He added that the banking sector needs to be brought under stricter monitoring in the future.
The event was jointly organised by the Bangladesh Economic Association and the Department of Economics at Jagannath University.
Among those present were Bangladesh Economic Association Convener Prof Dr Mahbub Ullah, Member Secretary Prof Dr Helal Uddin, along with teachers and students from various departments of the university.
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