Rajshahi Krishi Unnayan Bank (RAKUB) is going to merge with Bangladesh Krishi Bank (BKB). Both the state-owned banks that specialize on agriculture have reached a consensus in this regard. A decision in this regard was made in a meeting held behind closed doors at the Bangladesh Bank on Wednesday. If everything goes well, a memorandum of understanding (MoU) among the parties concerned will be inked on Monday. Officials concerned of the two banks in question and Bangladesh confirmed the development to Bonik Barta.

According to the sources, Bangladesh Bank Governor Abdur Rouf Talukder called a meeting on the merger between BKB and RAKUB on Wednesday. Chairmen and managing directors of both the banks took part in the meeting. Senior officials of the central bank also attended the closed door meeting that took the decision on the merger. However, the issue was kept secret by all sides.           

When contacted, BKB Managing Director Shawkat Ali Khan told Bonik Barta, “The Bangladesh Bank government called chairmen and managing directors of both the banks. The merger issue was discussed there. But, the central bank will make the decision public. We have nothing to say on this.”

“Both the banks are owned by the state. Now, if the government makes a decision on the merger, we will certainly welcome it,” he added.

BKB was established in 1973 by a presidential order. The specialized bank was set up mainly to provide loans for producing crops and fish, and growing livestock. The bank deviated from its core objectives after 2010 when it started full-fledged commercial banking activities. It started opening of letters of credit and providing big loans. As a result, the bank became fragile after default loans went up significantly.     

RAKUB was established segmenting BKB in 1986 by a presidential order. The bank started its journey with the BKB branches in Rajshahi division. Later, the government set up new Rangpur division with eight districts of Rajshahi. This is why discussions were going on for a few years to merge these two banks. Like BKB, RAKUB also became a victim of money plundering during the period after 2010. The bank found itself in the danger zone after providing big loans to some influential customers for different purposes, including construction of cold storages.

According to Bangladesh Bank, BKP has a paid-up capital of Tk 9 billion. Till last year, the bank faced a capital deficit of over Tk 167.19 billion. The total loss incurred by the specialized bank stood at Tk 152.15 billion. The bank’s defaulted loans soared to more than 20 percent.

BKB is conducting its activities through 1,038 branches. The deposit from the clients stood at Tk 407.19 billion. Of the amount, loans worth Tk 320.48 billion were disbursed. The amount of defaulted loans is Tk 65 billion. The amount of defaulted loans of the bank went up, as big loans it provided after 2010 were not repaid.

The condition of RAKUB that run activities in Rajshahi and Rangpur districts is also quite feeble. The bank with a paid-up capital of Tk 8.24 billion is facing a capital deficit of Tk 24.72 billion. The bank holds a deposit of Tk 67 billion. It has disbursed loans of Tk 74.78 billion. Of it, loans worth Tk Tk 15.34 billion were defaulted which is 21.37 percent of total disbursed loans. Like BKB, RAKUB is also incurring loss year after year. Currently, the bank has 383 branches.

The banking sector of the country has been abuzz for last six months with extensive talks on merger and acquisition. The government and Bangladesh Bank want to bring down the number of banks in the country from 61 to 45. Exim Bank has already decided to acquire Padma Bank that is riddled with corruption and irregularities. A MoU between the two private banks was signed on March 18. Strong discussions are on about merging another 5-7 private and state-owned banks. Sources concerned say that announcement of more mergers may come in the current month.          

According to the deal signed between Exim Bank and Padma Bank, all the assets and liabilities of Padma will be transferred to Exim. However, the defaulted loans of Padma will be dealt with by the asset management committee constituted by the government. Exim will deal with the loan services of the bank. Everything of Padma like clients, branches, workforce and infrastructure will be passed on to Exim. There will be no existence of Padma bank after the completion of the acquisition process. However, no employees of Padma will lose their jobs as yet.

A Bangladesh Bank official with authority informs that the BKB-RAKUB deal will have the same conditions. Following the completion of the merger process, there will be no existence of RAKUB. The process will be comparatively easier as both the banks are owned by the government.