Bad banks should merge with good ones: Muhith

The banks that are performing poorly should be merged with the better performers, Finance Minister AMA Muhith said yesterday.

"It seems there are too many banks in our country, so we need laws to deal with the issues of merging banks and addressing the banks facing bankruptcy," he said at an event in his office in the secretariat.

Muhith said the authorities need to be prepared to handle the issues. "I expect merger."

Given the economic reality around the world, banks are not closed when their financial performance gets poor but are merged with the better performing ones, Muhith said.

BASIC Bank is the worst performer among the public sector banks now. "We need to make further efforts to improve the performance of the bank."

Among the other public banks, Sonali Bank's condition is quite bad.

The situation may continue because the bank has to invest in areas upon pursuit from the government, which would not fetch much profit, he said.

Bangladesh Krishi Bank's problem began when it started giving out commercial loans; it is supposed to provide only farm loans.

Going back to the banking history of the country, Muhith said there was no alternative to nationalising the country's banks after independence in 1971.

The decision to privatise the country's banks was taken in 1974 but it was not implemented until 1976-77. Muhith himself was involved in the process as a bureaucrat and later a finance minister.

He also said Bangladesh has left Pakistan behind on many indicators.

"We dislike Pakistan's interference [in Bangladesh's internal affairs] now and then. Internationally, Pakistan is the No. 1 rogue country, I think."

Commenting on the past banking malpractices, he said there was a time when the banks sanctioned money violating the lending criteria under political pressure, he said. "Many people got loans for political pressure though they had no track record of trading.

Thus, they became industrialists overnight. We are still bearing the brunt of it."  The new generation entrepreneurs, however, are not like them and are performing very well, he added.

Muhith received a cheque for Tk 10 crore as dividend from Bangladesh Development Bank Chairman Yeasin Ali.