Weighing downside risks, upside benefits of BKB-RAKUB merger

A government move for the merger of Rajshahi Krishi Unnayan Bank (RAKUB) with Bangladesh Krishi Bank (BKB) stokes fear it could weaken region-specific farm financing and create new operational challenges instead problem solving.
The banking regulator, on the other hand, has listed upside gains of the coupling, including enhanced farmers' access to banking services like credit, savings, and remittance, particularly in rural and far-flung areas of Bangladesh.
Managing Director of BKB Sanchia Binte Ali has sought the finance ministry's approval to submit a merger proposal to the central bank, officials said.
While the Financial Institutions Division (FID) review is underway, analysts point out that stakeholder consultations -- particularly with farmers' groups and employee representatives -- appear limited.
They argue that structural reforms, improvements in loan recovery and stronger governance within the existing framework could yield better results than an outright merger.
Concerns have also been raised about employee uncertainty regarding transfers, career progression and job security.
The proposal was approved in principle at the 854th meeting of the Bangladesh Krishi Bank board on April 25, 2024.
Subsequently, at another board meeting held on June 6 last year, a decision was made to seek guidance from the finance ministry to proceed with the merger process "in greater national interest".
According to the proposal, RAKUB currently lacks foreign trade and remittance operations -- an operational gap the merger aims to address.
Contacted, a senior official of the Financial Institutions Division said that as of late 2025 and moving into 2026, the long-discussed merger between BKB and RAKUB has transformed from a planned solution into what he described as a toxic union of two "deeply insolvent entities".
"The FID will review the proposal and take necessary steps in accordance with existing laws, regulations and government procedures," the official added, citing the document.
According to available figures, BKB's overall capital shortfall stood at Tk 292.07 billion as of June 2025.
The Tk 6.5-billion capital increase addresses less than 2.3 per cent of the massive deficit the bank currently grapples with.
"The shortfall remains a critical threat to the bank's stability," says one official.
The primary cause of the deficit is BKB's deteriorated loan portfolio, which has recently seen a dramatic -- but belated -- recognition of bad debts.
The bank's non-performing loan (NPL) ratio ballooned to nearly 50 per cent, specifically 49.44 per cent, of its total outstanding loans as of June 2025.
And RAKUB is in no better position, with a capital shortfall of approximately Tk 25 billion.
Critics argue that merging the two banks is akin to "tying two sinking ships together".
Instead of creating a stronger institution, the merger is expected to consolidate a mountain of non-performing loans, which already account for nearly half of BKB's total disbursed loans.
Depositors at these specialised banks are facing extreme difficulties withdrawing funds for urgent needs such as medical treatment and education, leading to frequent squabbles at branch offices.
The failure of the agricultural-financing banks poses a direct threat to national food security, too, the analysts say.
As credit flows to marginal farmers dry up due to liquidity shortages and alleged mismanagement, the agricultural sector -- which employs more than half the population -- is increasingly being pushed towards rural moneylenders and predatory microcredit schemes.
Meanwhile, the recently promulgated Bank Resolution Ordinance 2025 has sent ripples of anxiety through the country's financial sector. Critics argue the new legal framework grants the central bank "draconian" powers that could potentially compromise depositor safety in an effort to rescue failing institutions.
Bangladesh Krishi Bank was established in 1973, while Rajshahi Krishi Unnayan Bank was created in 1986 following the bifurcation of BKB's operations in the Rajshahi and Rangpur divisions.
Authorities focus on upside the coupling. If merged, they say, the combined entity would operate through 1,422 branches nationwide, creating the country's largest specialised agricultural-banking network.
This is expected to enhance farmers' access to banking services, including credit, savings and remittance facilities, particularly in rural and remote areas.
The proposal outlines several anticipated benefits, including better utilisation of human resources, a stronger capital base, enhanced investment capacity, and reduced administrative and operational costs.
The two-in-one bank is also expected to strengthen risk management, monitoring and supervision, and improve service quality through better coordination.
The document further claims the merger would modernise agricultural banking operations, boost profitability, and contribute more effectively to inclusive economic growth and rural development.

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