The banking sector of Bangladesh is currently undergoing an important change. The government has taken the initiative to form ‘Sammilit Islami Bank PLC’ by merging five Islamic style private banks which have been plagued by financial weakness, irregularities, loan fraud, money laundering and lack of good governance for a long time. Concerned authorities claim that this step will help restore stability in the banking sector. However, a section of economists and bank experts think that if the root cause of the problem is not removed, the desired result will not be achieved by the merger alone.
The five banks are merging
According to the government’s plan, First Security Islami Bank, Social Islami Bank (SIBL), Union Bank, Global Islami Bank and Exim Bank are being merged to form a new bank. According to the sources concerned, the administrative process of the merger is almost at the final stage.
According to Bangladesh Bank, it is not just institutional restructuring; Rather, it is a strategic initiative to protect the entire banking system from a possible major financial disaster.
Grim picture in forensic audit
The central bank’s forensic audit and asset quality review have revealed alarming information. The combined capital shortfall of the five banks is over one and a half lakh crore rupees. Majority of disbursed loans are now considered defaulted or uncollectible.
According to statistics, about 77 percent of the total loans of these banks are in risky condition. Where 10 per cent of non-performing loans is a concern in international banking standards, in some banks this rate has reached almost 98 per cent.
How is this crisis created?
According to experts, the current crisis did not develop overnight. Years of weak regulatory systems, political influence, uncontrolled board decisions and disbursement of large amounts of loans without proper scrutiny have complicated the situation.
Bangladesh Bank’s investigation has revealed that large amounts of loans have been taken irregularly through various corporate groups and benami institutions. It is alleged that a large part of this money is smuggled abroad or unproductive sector instead of being invested in the productive sector. Later, an attempt was made to resolve the situation by rescheduling the loan, but the actual financial situation did not improve.
Why is the government in the way of integration?
According to Bangladesh Bank officials, it was becoming increasingly difficult to keep the five banks functioning separately. On the one hand, pressure from depositors to withdraw money, on the other, severe liquidity crunch was hampering the normal operations of banks.
In this situation, taking into consideration the international experience, the decision of merger has been taken. The new organization will have a single capital structure, integrated IT system, new management and stronger oversight.
Policymakers believe that it will be easier for one large bank to raise capital, develop technology and implement restructuring programs than five separate weak institutions.
Warnings from experts
According to economists, merely changing the names of the five banks and forming a new institution will not solve the crisis. If the root causes of poor governance, poor asset quality, money laundering and defaulted loans are not addressed, new banks may face similar risks.
According to them, real success will depend on—
How fast can a defaulted loan be recovered?
How much does the liquidity situation of the bank improve?
Is it possible to ensure good governance in the new management?
How quickly can depositors’ confidence be restored?
The biggest question facing depositors
At present, the amount of deposits of customers in five banks is about one lakh 58 thousand crores. Many customers are worried about whether such huge amount of deposits will be safe or not.
Experts say long-term capital support, effective supervision, asset revaluation and rigorous debt recovery programs are needed to make the new bank successful. Real reforms, not just administrative changes, will be key to success.
Expectations of the new chairman
Sammilit Islami Bank’s newly appointed chairman Kazi Shairul Hasan termed it as an unprecedented challenge. He said that the new management has already started working and full operation will be started soon.
According to him, very few countries in the world have the experience of consolidating so many distressed banks at once. So this is also an exceptional initiative for the banking sector of Bangladesh. He expressed hope that through planned reforms and efficient management, the new bank will gradually turn around and the confidence of the depositors will be restored.
The big challenge of the future
According to analysts, this merger is not just an administrative decision; This is an important test for the future of the banking sector in Bangladesh. Over the next five to 10 years, reducing bad loans, establishing financial discipline, addressing the liquidity crisis and rebuilding customer confidence—these four factors will determine whether the new bank succeeds, or becomes a source of greater financial risk.
Times BD/ Zaman
