Write an essay in English on "Merger and Liquidation of Financial Institutions in Bangladesh".

Created: 3 days ago | Updated: 3 days ago
Updated: 3 days ago
Ans :
Merger and Liquidation of Financial Institutions in Bangladesh

The size of Bangladesh's economy is 460 billion dollars. Against this economy, there are 62 commercial banks in the country. Economists believe that having 62 banks is too many for an economy of this size. Among the existing commercial banks in Bangladesh, there are noticeable mismatches in their type of business, scope, and coverage. The competition in the banking sector seems to be more focused on making profit. Due to the high number of banks, competition for profit has increased, and at the same time, the rate of defaulted loans is also rising.

Role of Banks in the Economy: Banks are financial intermediaries. They do not produce goods or have their own products. Instead, they act as a link between depositors and borrowers. The main function of a bank is to collect money from depositors at a lower interest rate and lend it to borrowers at a higher interest rate. Based on these loans, new industries are created, foreign trade grows, and employment opportunities increase. On the other hand, banks ensure the security of depositors' money and give interest in return for deposits. So, as an intermediary institution, banks earn profit by dealing with money. Therefore, banks play a very important role in a country's economy. Until the early 2000s, the performance and efficiency of Bangladesh's commercial banks were commendable. They made great contributions in areas such as poverty reduction, employment creation, facilitating foreign trade, supporting government purchases and budget deficits, and improving living standards.

Context of Bank Mergers in Bangladesh:

  • Bad Loans: One of the biggest weaknesses in Bangladesh's banking sector is the large amount of bad or non-performing loans. Because of this, many banks are now at risk of financial collapse. If a bank shuts down, it can create a serious crisis in the country's financial system.
  • Poor Management or Ethical Failures: Some major loan scandals in Bangladesh include the alleged Hallmark scam, corruption in BASIC Bank, loan fraud in Janata Bank, and the recent bad loan issues in Islami Bank. In all these cases, bank staff, owners, and politically influential people were reportedly involved in the fraud.

What is Bank Merger? A bank merger means combining one bank with another. For example, suppose there are two banks; Bank A and Bank B. If Bank A is financially stronger than Bank B and decides to combine with Bank B, this is called a bank merger. Results of a Bank Merger:

  • The two banks become one single bank.
  • The merged bank operates under a single name.
  • The two boards of directors are combined into one.
  • The total deposits of both banks are added together.
  • Instead of two separate financial statements, one joint statement is prepared.
  • The merged banks work together under one name.
  • All liabilities are combined and treated as joint liabilities.

Initiative of the Central Bank: On January 31, 2024, during a discussion with top bank executives, Bangladesh Bank advised merging the weak banks.

  • In December 2023, the central bank issued a policy called "Prompt Corrective Action "Prоп (PCA)". According to this policy, banks are to be divided into four categories based on different indicators. As per the policy, the central bank will have the authority to stop weak banks from expanding their branches, taking deposits, giving loans, and may also decide to merge them.
  • This policy was expected to be implemented in March 2025, based on the financial reports of 2024.
  • The central bank had directed that 10 banks should be merged by 2024, which would reduce the number of banks in the country from 62 to 45.

EXIM Bank and Padma Bank: On March 18, 2024, for the first time in the country's history, Padma Bank was merged with EXIM Bank. Padma Bank (formerly Farmers Bank) was one of the nine banks approved in 2013. However, due to irregularities, its financial condition worsened significantly. Even after receiving multiple supports from the central bank, the situation did not improve.

  • Currently, Padma Bank has loans amounting to 5,741 crore taka, out of which 3,552 crore taka are defaulted loans. At the end of 2023, the bank had 6,186 crore taka in deposits, including 2,850 crore taka from various government institutions, which the bank is unable to repay.
  • The 3,500+ crore taka of bad loans from Padma Bank will be bought by an asset management company. This means the bad assets (loans and investments) causing the bank's problems will be removed. After that, EXIM Bank will restart operations with Padma Bank's good assets only.

Benefits of Bank Mergers: When banks are merged, the following benefits can be seen:

  • The amount of non-performing (default) loans will decrease.
  • The bank's income will increase.
  • The liquidity crisis will reduce.
  • The financial risks of the bank will go down.
  • No employees can be laid off within three years of the merger, ensuring job security.
  • The management board will become stronger.
  • The capital shortage will be reduced.

Before 2017, there were 17 state-owned banks in India. These were later merged into 10 banks. The main reason for bank mergers in the banking sector can be unfair competition. When smaller banks cannot compete with larger banks, they merge with the bigger ones. In Bangladesh's economy, the current rate of default loans is about 12.5%. This rate is higher among the new generation of banks. By merging weak banks with stronger ones, it is expected that management efficiency will improve, and the default loan rate will go down. In addition, the issues of liquidity and capital shortage will be reduced, and good governance in the banking sector will increase.

3 days ago

English

চাকরি প্রস্তুতির জন্য ইংরেজি বিষয়ের পাঠ্যসূচি মূলত দুইটি অংশে বিভক্ত— English GrammarEnglish Literature। English Grammar অংশে ইংরেজি ভাষার গঠন ও নিয়ম শেখানো হয়। এর মধ্যে রয়েছে Parts of Speech, যেমন Noun, Pronoun, Verb, Adjective, Adverb ইত্যাদি; Tense (Present, Past ও Future); Voice (Active ও Passive); Narration (Direct ও Indirect Speech); Article (A, An, The); Right Form of Verb ও Subject–Verb Agreement; Preposition; Degree of Comparison; Sentence-এর প্রকারভেদ; Transformation of Sentence; Conditional Sentence এবং Modal Verbs। এই অংশে মূলত নিয়ম জানা ও নিয়মভিত্তিক বহুনির্বাচনী প্রশ্ন অনুশীলন করা জরুরি।

অন্যদিকে ইংরেজি সাহিত্য (English Literature) বলতে মূলত ইংরেজি ভাষায় রচিত বিভিন্ন যুগের সাহিত্যকর্মকে (কবিতানাটকউপন্যাসপ্রবন্ধ) বোঝায়যার সূচনা ৮ম-১১শ শতাব্দীতে ‘বিউলফ’ (Beowulf) নামক মহাকাব্যের মাধ্যমে । জিওফ্রে চসারকে ইংরেজি সাহিত্যের জনক বলা হয় । বিভিন্ন সাহিত্য যুগের (যেমন: রেনেসাঁরোমান্টিকভিক্টোরিয়ান) মাধ্যমে এটি বিবর্তিত হয়ে বর্তমান রূপ পেয়েছে । 

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