Bangladesh Bank (BB) yesterday asked Union Capital and Prime Bank to submit a detailed plan about how they would merge.
The central bank sent letters to the two banks on Wednesday asking about the merger and how Union Capital would repay its depositors, sources said.
Before the move, the banking regulator primarily approved the merger between the non-bank financial institution (NBFI) and the private commercial bank.
"We have primarily approved the merger on Tuesday as they wanted to merge and applied with us," said Md Mezbaul Haque, executive director and spokesperson of Bangladesh Bank.
The development comes about as the issue of merging weak banks and financial institutions is gaining attention at policymakers' levels in recent times after the BB unveiled a banking sector recovery roadmap with plans of such mergers.
Industry insiders said the process of merging Union Capital and Prime Bank started in 2022 when the latter's board consented to signing a memorandum of understanding (MoU) with the NBFI to explore the opportunity of a potential collaboration.
East Coast Securities, an arm of East Coast Group, owned by Azam J Chowdhury, was the sponsor director of Union Capital till July last year.
Union Capital was a reputed financial institution until 2017. It has been struggling to repay deposits since 2018.
The problems in the NBFI surfaced when it fell into trouble returning a Tk100 crore deposit kept by British American Tobacco Bangladesh (BATBC.)
Union Capital incurred losses for the first time in 2019.
As of September, last year, the total amount of loans disbursed by Union Capital stood at Tk1,263 crore, of which Tk545 crore or 43.12% was defaulted, central bank data showed.
