Jannatul Kawser Riktha| Session: 2017-18 | Department of Finance
Bangladesh's banks have been an important part of the business for a long time. More loans that aren't being paid back (NPLs) are one of its recent problems. Another is that it takes a long time to adopt new technologies. A lot of people have thought that making banks work together might be a good idea. The question still stands: can unions fix the issues that have been plaguing Bangladesh's banks for a long time?
 Source: http://surl.li/bbtuui |
Bangladesh still has a lot of banks, even though it's 2024. These days, there are more than 60 business banks in a small market. In this case, it means that the area is full. Lenders tend to give out risky loans quickly because they want to get their money back quickly. This makes things worse for NPL. At the beginning of 2024, 8.88% of all loans were not paid back. Being short on cash is a scary sign that something is wrong with the system and needs to be fixed right away.
Several things could help the company that is having trouble after it merges. By making institutions bigger, economies of scale can help them get things done faster. If small banks are having a tough time competing, they might be able to get ahead by making more money and cutting costs. Most of the time, a company that has merged has more money, which helps it handle sudden changes in the market and buy new technologies.
In the world of business today, this is very important. The government works better, which is another big plus. Banks may be able to handle things better if they work together to make bigger banks. This may help fix some of the problems in the area. Bangladesh's government and central bank have seen that merging businesses could make them safer. The Bangladesh Bank made rules in 2023 that made it easy for companies to join together and do deals. The goal was to make things simple and get banks to work together. More banks should think about joining because it's good for business. This help from the government is very important.
Like, this change was clear when ABC Bank and XYZ Bank joined in early 2024. A lot of people believe that this merger is a smart way to improve a business so it can compete with the bigger ones in the market. Most people think the new business will be better run, have more money, and have better management. Sometimes it makes sense for banks to join, but it's hard to make that happen. Companies with different ways of working can have trouble getting along and waste time when they work together. This is known as mixing cultures. One more problem is the problem of governmental hurdles. It can be hard to understand the government scene, and it can take a lot of time and work. People who have a stake in the business, like workers, customers, and stockholders, may not want the merger to happen. This can make it harder or even cause problems. There's also the risk of clustering, which is what happens when two or more businesses merge and share the same risks. There may be more risks with this.
For deals to fix the issues in Bangladesh's banking sector
there needs to be a great plan. From time to time, the Bangladesh Bank will
need to help the merger process go more easily and get more people interested.
A tax break and help with studies are two ways they could do this. It is
important to raise the level of control across the whole company to make sure
that well-run companies that have joined stay open. Keep in touch with people
who want the merger to happen. This will help reduce opposition and make the
change go more quickly. So, investing a lot of money in technology can help
with customer service and make the new company stronger over time. To make
Bangladesh's banking sector safer and more useful, mergers are a big step
forward. However, there are still some issues that need to be fixed. The
economy of Bangladesh can grow faster if the sector deals with deals carefully
and keeps long-term plan goals in mind.
