Some 72 percent bankers are in favour of reducing the number of banks in Bangladesh through merger or acquisition as their number is high given the size of the economy, according to a survey.

About 88 percent of the respondents said mergers, acquisitions or takeovers may be executed to trim the number of banks, particularly the weak ones, found the survey of the Bangladesh Institute of Bank Management (BIBM).

The institute released a research paper titled “Exploring Merger and Acquisition in the Context of the Banking Sector of Bangladesh” at a workshop at its auditorium in the capital yesterday. Mohiuddin Siddique, professor and director of the BIBM, presented the paper.

The survey, which was conducted through interviews, showed 11 percent respondents are okay with the existing number of banks, while 17 percent declined to make comments.

Currently, 57 banks are operating in the market. Nine banks were given licence in 2013.

The report said aggressive lending by banks in the competitive market has caused pileup of bad loans.

As of June this year, total default loan stood at Tk 63,365 crore, accounting for 10.06 percent of the total loan outstanding. State-owned banks accounted for one-third of the total sour loans.

About 77 percent of the respondents think a merger between two poorly governed banks will not be successful in Bangladesh.

According to the research, improving asset quality was one of the prime motives behind the merger of Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangstha, but the result was not satisfactory.

The two state banks' combined default ratio was 28.57 percent in 2009 when they merged and started journey as Bangladesh Development Bank Ltd. BDBL's non-performing loan ratio stood at 46.18 percent in 2015.

In developed countries, the concept of merger is seen as an attempt to enhance profitability and expand internationally, but in Bangladesh the perception is that weak banks merge, said Khondkar Ibrahim Khaled, a former deputy governor of the central bank.

“As a result no merger became successful in Bangladesh,” he said.

Khaled also said the excess number of banks will make them grocery stores soon.

Moreover, the new amendment to the Banking Companies Act to allow four members from a single family to become directors of the board will bring disaster for the sector.

He called upon bankers to raise their voice against the amendment that the cabinet has already approved.

SK Sur Chowdhury, deputy governor of the BB, said the central bank is ready to allow merger if banks want and a guideline has been formulated to this effect.

Toufic Ahmad Choudhury, director-general of the BIBM, said the banking sector needs an exit policy.

BIBM Supernumerary professors Helal Ahmed Chowdhury and Yasin Ali also spoke.