The Bangladesh Bank has rejected proposals for setting up two new commercial banks on the grounds that the declining financial health of many banks does not warrant any new addition to the landscape.
In September this year, the BB has communicated its decision in September to Finance Minister AMA Muhith, who had asked the central bank to inspect the proposals.
One of the proposed banks is Bengal Bank of Bengal Group of Industries, a local manufacturer of plastic products.
Morshed Alam, a ruling party MP, is the chairman of the group.
The other bank is Peoples Islami Bank, proposed by MA Kashem, a businessman.
As of December last year, the total default loans in the sector stood at 9.2 percent and the capital adequacy ratio 10.8 percent of risk-weighted assets.
The capital adequacy ratio of four new banks was less than 12 percent in March.
The Bangladesh Bank had set a number of conditions for the new banks when giving them the licences in 2013, but they failed to implement them.
The central bank faced huge criticism in 2013 when it allowed the nine new banks.
The board of directors of the central bank took a decision in February 2013 that it would not allow any new bank.
Despite the board’s decision, Shimanto Bank, owned by BGB Welfare Trust, was given licence in 2016 as part of the prime minister’s commitment to the organisation.