The government plans to reduce the number of state-owned banks to just two by merging the remaining institutions, Bangladesh Bank Governor Dr Ahsan H Mansur has said, citing the need to restore good governance and curb long-standing mismanagement in the banking sector.
Speaking as the chief guest at a public lecture titled “Banking Sector: Current State and Future Challenges” at Jagannath University on Wednesday, the governor said Bangladesh currently has far more banks than necessary, creating administrative complexity and higher operating costs.
“Even 10 to 15 banks would have been sufficient for the country, but at present there are more than 60. Reducing the number of banks will lower costs and improve profitability, while making governance easier to ensure,” he said.
Currently, Bangladesh has nine state-owned banks, including six commercial banks—Sonali, Janata, Agrani, Rupali, BASIC and Bangladesh Development Bank—and three specialised banks—Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and Probashi Kallyan Bank.
Dr Mansur blamed governance failures and the absence of effective checks and balances for the deep crisis in the sector, alleging that around Tk3 lakh crore has been siphoned off over the years due to irregular and politically influenced lending.
“Loans were given under instructions from influential individuals, families and even the government. This destroyed the governance system of banks,” he said, acknowledging lapses by Bangladesh Bank and other regulatory institutions.
He said excessive concentration of ownership and control in private hands had further weakened the sector, citing the recent merger of five Islamic banks that were previously controlled by individuals.
“Because there were no checks and balances, nearly Tk3 lakh crore was drained from the country,” he added.
The governor noted that banking is one of the world’s four major economic sectors and ranks third globally, but in Bangladesh it dominates the financial system, leaving other sectors underdeveloped. “We now need to bring balance back by strengthening other financial sectors alongside banking. This will take sustained effort over a long period,” he said, adding that the income of a single bank in Singapore is comparable to the combined earnings of all banks in Bangladesh.
Jagannath University Vice-Chancellor Prof Rezaul Karim, speaking at the event, said the current governor had taken on the challenge of reviving a nearly collapsed banking sector. “We now clearly understand how fragile the sector is. Various measures are being taken to stabilise it, and we hope the positive momentum will continue,” he said.
The programme was jointly organised by the Bangladesh Economic Association and the university’s Department of Economics. Among others, Bangladesh Economic Association convener Professor Dr Mahbub Ullah and member secretary Dr Mohammad Helal Uddin were present.