Bangladesh Development Bank (BDBL) PLC is unwilling to merge with the state-run Sonali Bank PLC with an eye to bring back confidence in customers, sources said.
The BDBL has sought one-year exemption from maintaining the stipulated statutory liquidity ratio (SLR) in line with the existing Banking Companies Act 1991.
Then BDBL Managing Director Md Habibur Rahman Gazi sent a letter to the Bangladesh Bank (BB), seeking a waiver from merging with Sonali Bank.
Besides, following the ongoing changed situation alongside the recent decision of its board of directors, the bank has also called for grant immunity from the SLR requirement for minimum one year in order to improve the financial condition of the crisis-ridden bank.
Last April, a meeting was held with top representatives from BDBL and Sonali Bank with the then BB governor in the chair.
The former BB governor instructed the BDBL orally for merging with Sonali Bank, aiming to further strengthen the BDBL's financial condition.
The meeting was also mentioned that there were instructions from the highest level of the government regarding the merging with Sonali Bank. It was instructed to abstain from granting any new loans except CMSME (refinance) loans only after signing the MoU.
The meeting also sent a proposal with an approval from the board of directors.
On May 12, 2024, Sonali Bank and BDBL took a step forward in their merger plans by signing a memorandum of understanding (MoU) with a hope for a stronger financial institution.
A bank source said following the publicity of the signing of the MoU about the merger, the BDBL liquidity crisis has become acute as depositors, especially institutional depositors, have withdrawn their deposits at a significant rate. Collection of the bank deposits g0t reduction in a short period.
At present, another Tk 6.0 billion-Tk 7.0 billion institutional deposits are under pressure to encash on maturity, he added.
He explained that since its inception, the bank has never faced liquidity shortages. But, currently banks are facing crisis in treasury management.
As institutional depositors withdraw their deposits and disbursement of new loans is stopped, customers' confidence in this bank is gradually diminishing.
As a result, in the context of the merger issue, business of the bank, which is operating positively on all financial indicators, is currently facing severe challenges. In 2023, the private bank had no liquidity crisis, including provision and capital deficits, he also said.
The letter reads that in the present context, holding deposits of the bank has become a major challenge. It has also become impossible to maintain the AD ratio and SLR set by the Bangladesh Bank.
In the overall situation, the BDBL presented the MoU at its 324th board meeting held on September 02 last. It has instructed to send a letter to the BB governor, mentioning the context of the merger and the financial condition of the bank after the signing of the MoU, requesting necessary directives for next course of actions.
On September 19, 2024, the government cancelled the contractual appointment of the BDBL MD.
The financial Institutions Division (FID) also issued notifications about cancellation of the appointment of managing directors and chief executive officers of five other banks, including BDBL.
When contacted, immediate-past BDBL MD Habibur Rahman said, "The operating and financial health of the bank has already started getting well following taking some steps."
He also believes that the bank will turn around if the merger decision is not taken place.
Currently, the provision deficit of the bank stood at Tk 240 million as of June last. The volume of default loan stood at Tk 9.43 billion in the same period.
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