Prime Minister Sheikh Hasina has given the go-ahead to three new banks – Bangla Bank, People's Bank, and Police Bank – to start their operations in Bangladesh.
The prime minister stamped her approval on a summary letter from the Ministry of Finance, which was recently forwarded to the Bangladesh Bank for the final approval, sources said.
“We have relayed what the prime minister wants [regarding the three new banks] to the central bank,” said an official of the ministry's Bank and Financial Institutions Division, requesting anonymity. “Internal communication to this end is currently in progress between the government and the central bank.”
Bangladesh Bank sources said the central bank had already started the formalities after receiving the letter.
The summary letter by the Ministry of Finance, which contains the details of the new banks, says it is necessary “to issue licences for new banks on political consideration ahead of parliamentary election.”
The Dhaka Tribune has seen a copy of the letter.
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According to the letter, Bangla Bank has been proposed by the Bengal Group, whose chairman is ruling party MP Morshed Alam; People’s Bank has been proposed by Chittagong-based businessman MA Kashem, who is also the vice-president of Awami League's US wing; and Police Bank will be run by the welfare association of Bangladesh Police.
These three new banks add to the existing 57 commercial banks currently operating in Bangladesh.
The new banks are getting the nod at a time when nine most recently-launched institutions are already unsettling the market with their poor performances.
Sources at the Bangladesh Bank said the central bank earlier rejected the proposals for Bangla Bank and People’s Bank because of the unstable market, but now it is being forced to issue licence to the new banks by the government.
Meanwhile, Finance Minister AMA Muhith has written to the Bangladesh Bank for a comment on the licence proposal for another bank named Citizen Bank, applied by a former government official named Mohammed Iqbal, said ministry sources.
On November 27, when asked at an event why the government was approving proposals for new banks when some new banks were already struggling with their deteriorating financial health, the finance minister said there was still a huge market for banks
as a good portion of people in the country still remained “unbanked.”
He further said any banks that were failing to operate properly could always go for merger, which is permitted under the Bank Company Act.
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Economists and banking experts do not share the government's view in this regard.
Former Bangladesh Bank governor Dr Salehuddin Ahmed called the decision to issue licence to new banks in the current circumstances “illogical.”
“The existing banks are more than enough compared to the size of the Bangladeshi economy. The authorities concerned should rather focus on improving the existing banks’ performances,” he told the Dhaka Tribune.
According to sources, Bangladesh Bank is currently sitting on more than 80 bank licence applications. Although it has yet to approve any of them, investors in these proposed banks appear to be hopeful of receiving their licences within the tenure of the incumbent government.