Bangladesh Bank (BB) is planning to merge 10 banks within a year to address the ailing banking sector, particularly focusing on larger institutions grappling with mounting bad assets, which are now teetering on the brink of financial collapse.

The central bank's Executive Director and Spokesperson Mezbaul Haque on Monday disclosed this to the journalists. 

“Following the merger, the weak bank can become the strong bank while strong banks can be stronger banks,” he told reporters in a press briefing at BB headquarters in the city.

Mezbaul Haque said BB's various departments assess different components regularly for financial risk management.

But it is not a real health indicator, he added.

He said, "We developed a Prompt Corrective Action (PCA) framework to classify banks. As a result, banks will be evaluated in four categories. This will be done based on the balance sheet of 2024. It will be implemented from May 2025."

Despite all methods to cure the country's ailing banking industry, the amount of bad assets has increased further and reached its all-time high placing some big state-run banks on their deathbeds.

The amount of bad assets increased by Tk14,543 crore in 2023, while state-owned banks witnessed a rise in default loans of over Tk9,000 crore. Such a large amount of bad assets are eating away banks' profits which is one of the three major domestic risks that our economy faces, according to the International Monetary Fund (IMF) – something that our economic experts have been flagging for years. 

Earlier, Bangladesh Bank set a harsh 11-point roadmap to realise default loans and ensure good governance in bank operations. But all efforts went in vain as the default culture is 

The board of directors has taken such harsh decision to reduce overall defaulted loans to 8 per cent, state-owned bank defaulted loans ratio to reduce by 10 per cent and 5 per cent respectively, and reducing fraud, disguise and limit cross loan disbursement to zero level.