Depositors are withdrawing funds due to concerns about the safety of their money in the wake of merger decisions, exacerbating the financial woes of weaker banks.
Panic gripped depositors after news of Basic Bank鈥簊 merger with City Bank, National Bank鈥簊 merger with United Commercial Bank, Rajshahi Krishi Unnayan Bank鈥檚 merger with Bangladesh Krishi Bank, and Padma Bank鈥檚 merger with EXIM Bank.
Bangladesh Commerce Bank, ICB Islamic Bank, AB Bank, and Janata Bank were among the banks listed as weak by Bangladesh Bank in April.
Officials of the weak banks said that they had been facing an unprecedented crisis that was threatening the very foundation of the banks.
Afsar Uddin, who has a deposit of Tk 8 lakh at ICB Islami Bank鈥簊 Motijheel branch, told 抖阴精品 on Sunday that he had visited the bank three times in a month to withdraw his money but was sent back.
Afsar, an expatriate living in Italy, said that the bank had informed him to wait as it was dealing with a crisis expected to improve soon.
Afsar also said that he tried to contact the branch manager but did not see him at the branch during his any visit.
When 抖阴精品 attempted to reach the branch manager, a bank official said that the manager was not available.
Md Monir Hossain, head of the Motijheel branch of Padma Bank, said that after the merger issue emerged, there was a massive rush in deposit withdrawals in their banks.
He claimed that the bank did not deny any depositors who wanted to withdraw money.
However, for large deposit amount, the bank has implemented restrictive measures, disbursing funds in phases, he said.
Abdur Rahim, National Bank鈥簊 Motijheel branch manager, said that panic withdrawals were minimised after the new board announced that the bank would not merge with any other bank.
Shahjalal Fertiliser Company Limited, in a letter, requested Basic Bank to encash a Tk 10 crore fixed deposit along with interest as the bank was merging with a private commercial bank.
The company said that its board of directors had decided not to keep deposits in a private commercial bank.
The Bangladesh Premier League Twenty20 tournament鈥檚 governing council also informed Basic Bank of its plan to encash Tk 5 crore fixed deposit before the maturity date.
Selim Raihan, executive director of the South Asian Network on Economic Modeling (SANEM), criticised the Bangladesh Bank鈥簊 merger decisions, stating that they were ad hoc arrangements without proper assessment or feasibility studies.
Depositors are withdrawing funds amid concerns about the safety of their funds following the merger decisions, he said.
He also criticised forceful merger decisions.
Raihan said that there was a lack of clarity regarding handling loan defaulters, managing the huge bad assets of weak banks, and protecting depositors鈥� interests.
The banking sector has already been suffering from a confidence crisis, and such opaque initiatives would worsen the situation, he said.
The banking sector, which is a very important sector in the economy, has been badly managed for a long time, Raihan observed.
There have been massive irregularities, scams, mismanagement, and plundering, he said.
He expressed disappointment at the absence of a roadmap to address these issues and criticised the central bank for not taking adequate measures to tackle the root problems.
As a result, questions arose about whether the merger decision was made to save some errant borrowers, Raihan said.
In a letter to the Financial Institutions Department on May 7, Basic Bank managing director and chief executive officer Md Anisur Rahman reported a deep crisis following news of a merger with City Bank on April 8.
The bank stated that depositors had withdrawn approximately Tk聽2,500 crore since the merger news broke.
Government offices, departments, and agencies have also requested withdrawals, and the bank was not receiving fresh deposits from any other sources, it said.
This has led to a statutory liquidity reserve (SLR) deficit of around Tk聽1,800 crore, raising concerns about potential check dishonour in the future and damaging public confidence.
The bank warned that if the situation persisted, it could fall into a deep crisis, negatively impacting the entire banking sector.
Bankers said that these events contributed to public anxiety about the safety of their savings in banks, despite assurances from BB officials that deposits would remain safe.
The World Bank and International Monetary Fund expressed their concern over merger attempts between weak and strong banks.
The World Bank, in its Bangladesh Development Update, launched at a press briefing at its Dhaka office on April 2, cautioned that imprudent mergers without a thorough assessment of asset quality may be counterproductive.
Rapidly implementing bank mergers before addressing these issues may further undermine confidence in the sector, deterring intermediation capacity, it said.
Transparency International Bangladesh, in a statement on April 23, criticised the rushed and opaque bank merger process, stating it has heightened anxiety and uncertainty in the banking sector.
They highlighted concerns about default loans and accountability in weak banks, suggesting that the process avoids addressing the core issues and grants impunity to those responsible.
The issue of bank mergers came to the fore after Bangladesh Bank governor Abdur Rouf Talukder, at a meeting with the Bangladesh Association of Banks on March 4, urged bank owners to decide on merger partners.
The central bank provided a list of 10 banks to choose from which they wanted to merge voluntarily.
He warned them of forced mergers under the prompt corrective action framework issued on December 5, 2023.
Rajshahi Krishi Unnayan Bank, NBL, and Basic have declined BB鈥檚 merger proposal, clarifying their stance.
Several top bankers said that strong banks were not willing to go for mergers with weak banks and be burdened with their toxic assets and liabilities.
They also said the central bank was 鈥榝orcing鈥� banks into mergers at informal meetings with top management and board members of selected banks.
When the merger issue raised confusion among depositors, creating chaos in the money market, the Bangladesh Bank suddenly came up with another announcement that it would not accept any more merger proposals for now.
