Sonali Bank, BDBL sign MoU for merger

State-owned Sonali Bank and the Bangladesh Development Bank Ltd (BDBL) on Sunday (12 May) signed a memorandum of understanding (MoU) to merge at the Bangladesh Bank head office.

Following the signing ceremony, BDBL Chairman Shamima Nargis said the merger with Sonali Bank was necessitated by the BDBL's challenges in recovering defaulted loans from its customers.

She said out of the four indicators of the BDBL, three are performing well, with only one exhibiting weakness – non-performing loans. "We have successfully reduced non-performing loans from 41% to 34%, though," she added.

The BDBL chairman further said, "It is not possible to reduce defaulted loans from 34% to 5%-10% within six months. In addition to our efforts, defaulting customers must also cooperate. If they do not, various steps need to be taken to sell their collateral including filing cases with the money loan court. Achieving significant results in this regard within six months is not feasible."

Answering questions from journalists about why they did not take more time, she said, "Private banks are guaranteeing reductions in defaulted loans worth so many crores within the next year. As a government bank, I cannot provide such a guarantee because we have only 50 branches. It will take 5-10 years to improve the indicators, but the central bank will not grant that much time."

On 3 April, the central bank announced the merger of Sonali Bank and the BDBL. However, neither of the banks themselves proposed the merger.

Speaking anonymously to TBS, an official of BDBL said, "We did not submit any proposal to the central bank regarding the merger. They said we will be merged with another government bank as per the government's decision. If the government desires, we have no grounds to object."

BDBL employees have meanwhile issued an open letter against the merger process. In this regard, the BDBL chairman said, "The boards of the two banks have made the decision to merge. They have deliberated on various factors and considerations to determine what is in the best interest of both institutions."

Sonali Bank Managing Director Afzal Karim told reporters that the BDBL employees have no reason to fear the merger.

"The bank will emerge stronger. Following the signing of the MoU, the Bangladesh Bank will proceed with the next steps, including the appointment of an audit firm," he said.

He said Sonali Bank's current deposit amount is Tk1.50 lakh crore, whereas the BDBL holds only Tk3,200 crore. "As a result, the impact on Sonali Bank will be minimal. The BDBL employees have no reason to fear or panic. Despite our around 8,000 employees, we still face a shortage of manpower, whereas the BDBL has only around 600 employees. Therefore, they have nothing to fear.