The central bank has approved six more private commercial banks (PCBs), aiming to help strengthen the ongoing financial inclusion programmes through bringing unbanked people under the banking network, Bangladesh Bank (BB) officials said.

The decision came at a meeting of the BB's board of directors, held at its central office Sunday, with BB Governor Atiur Rahman in the chair.

The six approved PCBs are: Union Bank Limited, Modhumoti Bank Limited, the Farmers Bank Limited, Meghna Bank Limited, Midland Bank Limited and South Bangla Agriculture and Commerce Bank Limited.

"The board has approved the six PCBs after a thorough scrutiny of all 16 short-listed applications one by one," Deputy Governor of the BB SK Sur Chowdhury told reporters after the meeting.

He also said the board has also decided to issue letters of intent (LoI) to the approved six PCBs, giving them a period of six months to comply with the existing rules and regulations for setting up new commercial banks.

"We'll issue licenses to the PCBs after their proper compliance with all conditionalities," Mr. Sur said, adding that loan defaulters and tax evaders would not be allowed to be the directors of new banks.

The proposed chief executive officers (CEO) of the approved PCBs will have to present their business plan before the board, he said while explaining the conditionalities for the new banks.

The authorities concerned of the approved PCBs will have to deposit the amount of their paid-up capital worth Tk 4.0 billion with the central bank, before starting their operation, the BB deputy governor added.

"All the applicants are Bangladeshi citizens. The BB board has considered those who were found eligible, based on their qualifications," he said replying to a query if the approvals were given only to Awami League (AL)-affiliated people.

The proposed chairmen of newly-approved banks are: Union Bank Limited -- Shahidul Alam, Modhumoti Bank -- Humayun Kabir, Farmers Bank -- Dr Mohiuddin Khan Alamgir, Meghna Bank -- AHN Ashiqur Rahman MP, Midland Bank -- Moniruzzaman Khandker and South Bangla Agriculture and Commerce Bank -- SM Amjad Hossain.

"Since bank licences were last issued in 2000-01, there have been many significant developments in the Bangladesh economy," the central bank said in a statement, explaining the economic context and rationale behind issuing new bank licences.

The economy has grown and the banking system has become more competitive but there are still a large number of under-banked people in Bangladesh, the BB added.

Recent estimates from a survey conducted by the Institute of Microfinance found that only 45 per cent of the nearly 9000 households surveyed do have access to banks and micro-finance institutions (MFIs) for loans.

The population per branch (21065) and the ratio of loan accounts per 1000 adults (42) suggest that the outreach of the formal financial sector in Bangladesh is lower than that in India (14485 and 124 respectively) and Pakistan (20340 population per branch and 47 loan accounts per 1000), according to the statement.

"As such, the new banks will help increase the quality of banking services by increasing competition in the banking sector. They will also be able to meet the unfulfilled demand for credit by the private sector whose needs have grown in line with a fast expanding economy," it noted.

Moreover, for new banks the ratio of opening rural and urban branch will be 1:1 which will help increase bank branches in rural areas and improve financial inclusion, the central bank said.

Earlier, 37 applications were submitted to the central bank for setting up of new PCBs. Of them, 21 were rejected by a preliminary scrutiny committee mainly due to lack of necessary papers and documents.

Last Thursday, the central bank approved three new commercial banks sponsored by non-resident Bangladeshis (NRBs) to help boost the inflow of foreign exchange.

Currently, a total of 47 commercial banks are in operation in Bangladesh.

Financial Express/Bangladesh/ 9th April 2012