The government has been urged to make clear its stance on merger of the country's weaker banks in the fiscal measures to be announced in the upcoming budget for fiscal year (FY) 2024-25.
Businesses and economists have raised the issue at a pre-budget meeting in the city on Sunday amid growing panic, confusion and fear about such a much-talked-about issue in the financial sector.
They claimed that a sort of fear is prevailing in the sector as a result and has already affected the industries, bankers and common people.
The business leaders urged the government not to go for the merger initiative in a hasty manner, rather form a 'bank commission' to seek recommendation for a suitable process in this regard.
Dhaka Chamber of Commerce and Industry (DCCI) in association with Bangla daily Samakal and Channel 24 organised the "Pre-budget discussion meeting: private sector perspective" at a city hotel.
Suggesting devising a long-term plan for reducing non-performing loans, the businesses raised questions about continuous bail-out programmes for the banks to recover from the distressed situation of NPLs in some banks.
They placed a set of recommendations to accommodate in the budget for FY 2024-25 that focused on employment generation, control of energy prices, ease of doing business, and ensuring private sector credit flow.
Speaking as chief guest, Finance Minister Abul Hasan Mahmud Ali said that the upcoming budget will be encouraging for the private sector and hoped that the economic growth momentum will continue towards achieving the targets.
He also said that the government is firmly committed to facilitate the private sector so that they can do their business hassle-free.
He said the government will also positively consider necessary policy reforms in the next budget.
Moreover, long term strategy, skills development, support to import substitution industries, export diversification, internal resource mobilization, and employment generation will get priority in the next budget, he added.
Former President of the American Chamber of Commerce in Bangladesh (AmCham) Aftab ul Islam urged the government to clarify the process of the much-talked-about merger or demerger.
"A paragraph in this regard should be included in the budget for FY 2024-25," he added.
"There is a growing fear and confusion among people about the merger of banks centering what kind of problems will arise if there is a merger with a weak bank," he said.
He said that as a client he would reconsider continuing his account with a bank that may absorb a weaker bank and its balance sheet.
In the meeting, General Secretary of Bangladesh Economic Association (BEA) Dr Aminul Islam also said there has been panic among the people regarding the merger of the banks. He said merger is good and it happens in the banking sector worldwide.
He said the number of banks in the country is excessive in terms of the size of the economy if the comparison is drawn with India or USA.
He said there should not be any hasty decision about merger, rather it should be done gradually.
Mr Islam said the government should formulate a bank commission and merger should be carried out as per their recommendation.
AK Azad, former president of the Federation of Bangladesh Chambers of Commerce & Industry (FBCCI), demanded disclosure of names of willful defaulters and those who've taken the money abroad rather than investing it in their businesses here.
He said, "If their [defaulters] names are disclosed, they will come under social pressure and will be forced to pay the money."
Mr Azad, also a member of the current parliament, said: "Why should Sonali Bank and Rupali Bank be subsidised with taxpayers' money?"
He suggested even more empowerment of the central bank to ensure good governance, especially in the financial sector.
Replying to the concerns raised at the meeting, Financial Institutions Division Secretary Sheikh Mohammad Salim Ullah said merger will not occur suddenly and it would happen through a long process.
He ensured merging will follow proper process according to law.
"So there is nothing to be panicked about," he said.
He said the government is formulating legal infrastructure for the asset management companies, and a roadmap has been prepared to establish good governance in the overall financial sector.
Deputy Governor of Bangladesh Bank Dr. Md. Habibur Rahman said inflation control, stability of exchange rate, and reducing non-performing loans (NPLs) are a few of the priority tasks for Bangladesh Bank at this moment.
To reduce inflation, he said, Bangladesh Bank had to increase the interest rate based on the 6-month moving average so that the private sector does not suffer.
NBR Chairman Abu Hena Md. Rahmatul Muneem said tax collection is not the only duty of the NBR, rather assisting the private sector is one of its important duties.
He informed that the total individual taxpayers increased from only 2.1 million in 2020 to 3.7 million in February 2024.
He called upon the business community to boost local demand through adequate increase in production. The government is giving more priority to increase the tax-GDP ratio.
DCCI President Ashraf Ahmed said that a few policy reforms, reducing NPLs, increasing forex reserves, boosting private sector credit flow and stable liquidity situation are crucial for a sustainable financial sector.
He also said that the industry needs uninterrupted power and energy supplies at competitive prices.
Mr Ahmed said there should not be one law to be applied for the willful loan defaulters and non-willing defaulters.
Director of Eastland Insurance Company Rizwan-ur Rahman said insurance companies own banks and financial institutions as a global trend while Bangladesh is going in the opposite direction as the bank directors own insurance companies.
Mr Rahman, also former president of DCCI, said the 15 per cent VAT on reinsurance is a double taxation as tax has already been paid at sales of a policy.
He further said that 5 per cent gain tax on policy is irrational for now and an obstacle to life insurance penetration.
He urged the NBR to implement automation to increase the tax net significantly.
Vice Chairman of Shanta Asset Management Arif Khan said the government should widen the 10 per cent tax gap between the listed and non-listed companies.
He said that the existing valuation method is not suitable for the well-performing companies that prevent them from going to the capital market.
He said Bangladesh cannot reach the trillion dollar economy without development of mutual funds, bond-market development and capital market.
BKMEA Executive President Mohammad Hatem urged the government to clearly define who are the unwilling loan defaulters and willful defaulters.
He also said the central bank should stand beside the unwilling defaulters while formulating a roadmap for the NPLs.
Former DCCI President Shams Mahmud urged the government to provide energy incentives to the export-oriented factories that are following the energy-saving policies.
Former DCCI President Sameer Sattar said deep offshore exploration of hydrocarbons should be considered by now as the industries will not remain competitive in the international market if the energy prices are not reduced.
Former NBR member Farid Uddin Ahmed said justice should be ensured by reducing the indirect taxes, known as regressive tax, and import tax to cut burden on the common people.
In its proposal, DCCI urged the government to introduce infrastructure bonds, various government bonds and reform in the capital market to ensure long-term cash flow in the financial market.
It also said that the CSMEs should get loans on easy and simple conditions for the sector's development.
DCCI said Bangladesh requires an investment of $245 billion in the logistics infrastructure sector by 2030 and $1.0 trillion by 2041 to become a developed nation.
In a paper, the chamber said the size of the economy would have to be $2.5 trillion one to become a developed nation by 2041. Besides, per capita income will have to increase to $12,650 and annual exports should rise to $350 billion.
The investment-to-GDP ratio will have to increase from 36 per cent in 2030 to 40 percent in 2041, it said.
Dr. Masrur Reaz, CEO of Policy Exchange Bangladesh, Imran Karim, Vice Chairman of Confidence Group, and Syed Ali Jowher Rizvi, Managing Director of Summit Alliance Port Ltd., took part in the discussions from the private sector.
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