Finance Minister AMA Muhith on Monday said the government is going to issue licences for setting up three new banks, reports UNB.
The announcement came at a time when nine recently launched banks are already unsettling the market with thei
r poor performances.
"We are giving (permission for) three new banks," he categorically said while talking to reporters at Dhaka Club following a seminar on insurance sector in Bangladesh.
Quoting Bangladesh Bank sources, UNB reported that two of the three proposed banks are Bengal Bank and People's Islami Bank. The name of the third one and its owner have yet to be disclosed.
Refuting the notion that the banking sector is riddled with irregularities and lacks good governance, the finance minister said banks failing to operate properly would go for merger.
"There is a provision in the banking law for merger. If any bank fails, it can follow that provision,” he said.
Defending the government's move to allow more banks to start operating in Bangladesh, Muhith said there was still a huge market for banks as a good portion of people still remained “unbanked,” a view which economists and bankers in the country do not share.
Recent newspaper reports suggested that the Bangladesh Bank recently rejected proposals for setting up three new commercial banks on the grounds that the deteriorating financial health of many banks, especially the nine that were last set up, does not leave much room for more new banks in the business.
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The central bank conveyed its opinion to the Bank and Financial Institutions Division when the former was asked to scrutinize the proposals of three new banks.
A ruling party lawmaker, who is also the owner of Bengal Group of Industries, has applied for the Bengal Bank, while Chittagong-based businessman MA Kashem pursued for People's Islami Bank.
At present, there are 57 banks in Bangladesh: 40 local private banks, nine foreign and eight state-owned.
Officials at the Bangladesh Bank believe that the financial health of many banks are in a bad shape and it would have deteriorated further if there was no policy support from the regulatory authority.
According to the Bangladesh Bank, as of December 2016, the total default loans in the banking sector stands at 9.2%, while the capital adequacy ratio is 10.8% of risk-weighted assets. Total stressed advances (defaulted and rescheduled loans) rose to 17.2% from 16.1% from the previous year.