A noted economist on Saturday proposed establishment of "super banks" instead of mergers and accusations (M&A) in Bangladesh, as he believes that the present move of merging weak banks with their stronger counterparts will be detrimental to the banking industry.
Dr. Zia Hasan, an economist and project researcher under the education and research ministry of the German Federal Government made the proposal in a webinar on bank mergers and acquisitions on the day.
The Forum for Bangladesh Studies organised the event. CPD Executive Director Dr. Fahmida Khatun, economist and international affairs director of Sydney Policy Analysis Centre in Australia Dr. Niaz Asadullah, head of South East Asia of Global Labour Organisation, also spoke at the event.
Journalist Monir Haidar moderated the webinar.
Dr. Hasan said the central bank could establish three separate super banks in Bangladesh to overcome the present situation of the banking industry where non-performing loans are huge.
A super bank is a large bank, usually one that owns several other banks.
Firstly, one super bank can be formed consisting of all Islamic or sharih-based weak banks.
The second super bank may be formed by incorporating all weak scheduled banks.
And the third super bank can be formed by merging all state-owned commercial banks.
He viewed that the existing move to merge with comparatively stronger ones would be harmful for the economy.
He expressed the fear that under the present move the central bank may print money or issue bonds, adding such a development will impact the economy significantly.
He said the common people will pay as a consequence of such mergers through inflation and other means. But the shareholders who have plundered the money will be protected.
Hasan was critical of the issue of formation of an asset management company or AMC. Once the AMC buys bad loans and the central bank provides money by printing it, that will impact the economy, he said.
"The common people who are innocent will pay for this".
He said the central bank's present merger move had no scientific basis as they had the same market and the same products.
Speaking at the webinar, Dr Fahmida Khatun said that the banking industry needed to be reformed but the present move panicked the good banks.
She said there were some banks who skipped the list of bad banks due to their influences.
"If two weak banks merge together, then nothing will happen there".
She said two banks, Shilpa Bank and Shilpa Rin Sangstha, were merged and a new bank named Bangladesh Development Bank Limited or BDBL emerged.
"But there was no positive outcome," she added.
Of the total loans disbursed by the BDBL, 42.43 per cent were bad loans, she mentioned.
She also reiterated formation of a banking commission with right people having the right visions.
Speaking on the occasion Jyoti Rahman said that political would be very much important in such reforms.
He said Bangladesh's growth projection by IMF and other institutions was good. Bangladesh had been continuously facing deficits in its current accounts with the rest of the world. He said it was equivalent to 3 or 4 per cent of the GDP.
He feared that once such a type of merger happened there would be a shortage of bank loans for the private sector in the future.
Once the loan size dropped, the investment, and macroeconomic consequences would impact the economy.
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