Central bank under political pressure 2011-08-01

Bangladesh Bank has been under pressure from politicians to give approval for at least 15 new banks, finance ministry officials say.

Some ministers, Awami League lawmakers and business groups close to the ruling alliance are lobbying government high-ups for permission to set up new banks.

Currently, 47 banks--local and foreign--are operating in the country.

From 2001 till date, the central bank has received 82 applications, but none of them meets the requirements for obtaining licence, said a BB official.

If it finds that allowing new banks is viable, BB will invite fresh applications through an advertisement, the official said.

The number of new banks, however, will not cross three, added the official.

Speaking in the budget session in June, Finance Minister AMA Muhith said some new banks would be given licence and BB would soon invite applications for that.

He had earlier said that only two banks--Probashi Kalyan Bank and the NRB (Non-Resident Bangladeshis) Bank--would get approval.

Probashi Kalyan Bank has already got the approval and the NRB Bank has been asked to submit its application.

At a meeting with the finance minister on July 17, most members of the BB board of directors opposed giving licence to new banks.

After the meeting, Muhith said the central bank would conduct a study to find whether new banks can be approved in the prevailing situation. The findings will be placed in the BB board meeting next month.

BB will send the study report to the government with the board's opinion.

The minister at a meeting with the Economic Reporters' Forum the same day said political decisions will be taken about allowing new banks on receipt of the central bank's report.

Asked whether the new ones will be allowed to operate at the behest of political leaders, he said, “May be. I don't know.”

Twenty people have applied for banking licence since the AL-led grand alliance came to power in January 2009.

Among the big shots, AL Presidium Member Mohiuddin Khan Alamgir has so far submitted applications twice. Also chairman of the parliamentary standing committee on public accounts, he submitted an application in April 2009 to set up SME Bank. In 2010, he filed another application for a new bank, The Farmers' Bank Ltd.

An application for setting up Modhumati Bank Ltd was submitted in 2010. AL lawmaker Sheikh Fazle Noor Taposh is one of the directors of the proposed bank.

National Professor Kabir Chowdhury, Prof Deen Mohammad and Prof Azizur Rahman have taken initiative for setting up Self Employment Bank.

After the Liberation War in 1971, there were only six banks and all of those were state-owned.

During the Ershad rule, nine banks were set up in the private sector including the denationalised Pubali and Uttara banks from 1982 to 1987.

The BNP government gave permission to eight new banks from 1992 to 1996. In 1999-2001, the AL government allowed 13 new private banks. After that, no licence was given for opening new banks.