Most of the directors of Bangladesh Bank are worried over the plan of floating too many new banks as the central bank is under pressure from the government to give nod to around 12 newcomers.

Rather, they stressed the need for ensuring quality of the new banks, and said approving more than 3-4 banks will be unwise in the present situation.

BB Board of Directors discussed the issue of allowing new banks at a long meeting with Governor Atiur Rahman in the chair.

Proposals for setting up three banks sponsored by non-resident Bangladeshis (NRBs) were placed in the meeting but there were no proposals for allowing local private banks.

A member of the board said threadbare discussions were held on allowing both NRB-backed and local private banks. He said the central bank has been under heavy pressure from the government high-ups to approve around 12 new banks including both NRB-backed and local private banks.

Also, there are pressures on the central bank for giving quick approval to the banks, he said.

The board members said, taking into consideration the present economic condition and the liquidity pressure faced by the existing banks it will not be wise to approve more than 3 to 4 banks.

The board told the central bank management to place the proposals for approving the new banks in the next meeting after strictly scrutinising the merits of the proposals.

Some of the board members told the meeting that it will not be proper for the central bank to approve any bad bank bowing to political pressure, according to officials present at the meeting.

The board member said the central bank must uphold its independence.

A board member said, it should be reviewed strictly and completely professionally whether the criteria set for the proposed banks were met in toto.

Finance Minister AMA Muhith also admitted yesterday that the central bank was under pressure.

Earlier Muhith said, only one NRB bank would be approved but now the central bank is under pressure from the government high-ups to allow three NRB banks. However, Muhith said, “Some pressure may be there.”

NRB banks will have to provide Tk 400 crore as capital in foreign currency, the board said.

The board asked the central bank management to bring together the proposals for the NRB banks and the local private banks.

A central bank official said another board meeting may be held within this month.

On allowing new banks, Muhith at his secretariat office said licences for setting up new banks may be given in the next two months, but a minimum of six months will be required for them to go into operation.

However, about the number of banks to be approved the finance minister said the central bank will decide on that.

The Daily Star/Bangladesh/ 16th March 2012