In the midst of the expansion of the Islamic banking sector of the country, the governor of the central bank recently said. A comment by Ahsan H Mansur created a new discussion. He said the government could consolidate the five Islamic banks in the country and adopt plans to form two major Islamic banks. His speech has created widespread discussion in the concerned palace. They say, if the central bank takes such initiative, will it overcome the problem, or will it create a new crisis?
Currently, there are 5 full Islamic bank activities in the country. The combined deposits of these banks are about Tk 1 lakh 5 thousand crore and the total investment is more than Tk 1 lakh 8 thousand crore. Although Islamic banking is becoming increasingly popular. However, some banks are in crisis due to lack of good governance. There is widespread controversy over the activities of the banks who have influenced the S Alam Group, especially. After the change of government, Bangladesh Bank Slam Group removed the family members from the board of directors of the bank. After that, Islami Bank is still trying to turn around Bangladesh and social Islamic Bank. However, Shahjalal Islami Bank, Al-Arafah Islami Bank and Standard Bank are in a better position.
In this context, the central bank has approved the new 'Bank Resolution Ordinance-2021', under which the exhaustion of financially vulnerable banks may be started or the merit process may begin.
However, according to many experts, it cannot be realistic to form two major Islamic banks by combining all banks. According to the CEO of at least three Islamic Banks, the integration between certain banks may be possible, but the process of combining 5 banks simultaneously may be risky for the bank sector.
Former Chief Economist of Bangladesh Bank Dr. Mustafa told the Mujari Bangla Tribune, “It is more important to bring good governance back and develop financial conditions than to reduce the number of banks.” The desired benefit will not come only by integrating. '
Global Islami Bank Chairman Mohammad Nurul Amin also commented, 'Weak banks should be enabled to survive first. Then the integration may be effective. '
At present, most Islamic banks are in the process of verifying the quality of resources through international audit institutions. According to this review, the decision to consolidate the future may be decided, sources said.
According to experts, Shariah -based banking in Bangladesh is popular, but due to the lack of good governance and control of some influential groups, the bank has created a long -term risk for the bank sector. The consolidation initiative can only be effective – when it will be operated on the basis of financial transparency and accountability.
What the governor said
Bangladesh Bank Governor of Bangladesh Bank Dr. Bangladesh Institute of Bank Management (BIBM) at the inauguration of the annual banking conference in Mirpur on April 7. Ahsan H Mansur said, 'Currently there are several small and troubled Islamic banks in the country. Two strong and well -organized banks will be formed by consolidating them. '
He also said, “Separate laws and monitoring structures will be developed for Islamic banks and this sector will be given a new form following international good practice.”
Banking sector crisis and consolidation plan
The banks and financial sectors of Bangladesh have long been suffering from various problems. Many banks are in danger due to irregularities, mismanagement and defaulted loans. The situation of non -bank financial institutions, especially, is now very crisis. In this situation most banks are unable to retain their position and they are lending from other banks due to the liquidity crisis.
Former World Bank Chief Economist Dr. Zahid Hossain commented, “Bank merit is an alternative, but in this case the banks have to give time.”
The potential risk and future challenge of integration
The plan that the World Bank and the central bank have created on the consolidation process will only be effective when the banks can be brought under good governance and improving their financial condition. At present, the Islamic Bank sector of the country is in crisis, especially private Islamic banks have been affected by loan scandal and irregularities.
Bangladesh Bank is hoping that the decision to consolidate Islamic banks through the advice and international review of experts will be decided, but in order to be successful in the next step of integration, the discipline, good governance and financial transparency of the banking sector must be ensured.
However, the current consolidation plan is needed more time to succeed and if the right decision is not made, it can create a new crisis in the bank sector.
In this context, Bangladesh Bank is not taking any steps on bank integration. Bangladesh Bank spokesperson and executive director Arif Hossain Khan said the central bank is in the waiting position until the bank resolution ordinance, 2021 is issued.
He told the Bangla Tribune, “We are not starting any activities about bank integration. We are waiting for the Bank Resolution Ordinance, 2020. If it is issued in the form of ordinance, then Bangladesh Bank will take necessary steps accordingly. '
It should be noted that the Advisory Council has already approved the 'Bank Resolution Ordinance, 2021' to ensure good governance in the bank sector and to play an effective role in the poor bank management. It will be issued in the form of ordinance soon if the President's consent.
