Bangladesh Bank has announced plans to merge the country’s nine state-owned banks into just two large entities, a move aimed at strengthening governance, restoring financial discipline, and addressing chronic mismanagement within the banking sector. The proposal was outlined on Tuesday by Bangladesh Bank Governor Ahsan H Mansur while speaking at a discussion at Jagannath University in Dhaka.
The governor argued that Bangladesh is significantly overbanked relative to the size of its economy. At present, the country has 61 scheduled banks, a number he described as excessive. “In Bangladesh’s context, 10 to 15 banks are sufficient,” he said, adding that a smaller number of large, well-capitalised institutions would be easier to regulate and supervise. According to Mansur, the proliferation of small and weak banks has undermined governance and contributed to persistent financial instability.
Drawing international comparisons, the governor noted that India—whose economy is more than ten times larger than Bangladesh’s—has opted to consolidate its state-owned banks into four major entities. He also cited Singapore’s DBS Bank, which alone holds assets of around $1.2 trillion (equivalent to nearly Tk130 lakh crore), compared with the combined size of Bangladesh’s entire banking sector at roughly Tk20 lakh crore. Despite similar-sized economies, Singapore operates with only a handful of very large banks, underscoring the case for consolidation, he said.
State-owned banks earmarked for merger
Bangladesh’s nine state-owned banks currently comprise four commercial banks, two development banks, and three specialised banks, as outlined below.
| Category | Banks |
|---|---|
| Commercial | Sonali, Agrani, Rupali, Janata |
| Development | BASIC Bank, Bangladesh Development Bank |
| Specialised | Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Probashi Kallyan Bank |
The consolidation plan forms part of a broader restructuring of the financial sector. In recent months, Bangladesh Bank has overseen the merger of five troubled private Islamic banks into a new entity, Sammilito Islami Bank, and has initiated liquidation proceedings against nine non-bank financial institutions (NBFIs).
Governor Mansur attributed the sector’s fragility to years of mismanagement, irregularities, nepotism, and political interference. He estimated that losses linked to these weaknesses amount to nearly Tk3 lakh crore, with a substantial portion potentially laundered abroad. Speaking at the event titled “Banking Sector: Current Challenges and Future Prospects”, he alleged that between $20 billion and $25 billion may have been siphoned off through nepotistic channels.
Economists endorse consolidation
The proposal has received strong backing from economists. Zahid Hussain, former lead economist at the World Bank’s Dhaka office, described the merger of state-owned banks as “long overdue”. While supporting the initiative, he stressed the need for a clear and transparent roadmap for implementation.
Hussain noted that state-owned banks have remained trapped in a bureaucratic operating model and are particularly vulnerable to political influence. He pointed out that many of the country’s largest loan scams during the previous regime involved these institutions. Repeated government recapitalisation, he added, has placed a heavy burden on taxpayers.
Overbanking and weak balance sheets
World Bank data further highlight Bangladesh’s overbanking problem. In 2023, Bangladesh’s GDP stood at $323.28 billion, supported by 61 banks. By comparison, Pakistan, with a $400.17 billion economy, had 41 banks, while India’s $3.2 trillion economy operated with just 33 banks.
Despite more than Tk25,000 crore in government injections between 2009 and 2024, the financial health of state-owned banks remains fragile. Default loan ratios at BASIC Bank and Janata Bank exceed 70%, and several lenders face substantial capital shortfalls. Against this backdrop, policymakers see consolidation as a critical step towards restoring stability, protecting depositors, and rebuilding confidence in the banking system.