The Bangladesh Bank’s recent decision to merge troubled banks with financially stable ones has stirred controversy, with critics questioning the voluntariness of the mergers. Despite claims of voluntary action, reports suggest that the decisions are government-mandated and relayed through the central bank. Troubled banks, facing financial weaknesses such as high non-performing loans, are expected to merge voluntarily by December. However, the central bank will identify and enforce mergers under the Prompt Corrective Action (PCA) Framework from March next year. The forced merger decisions have faced protests and opposition from various quarters. The World Bank has warned that forced mergers might be counterproductive without a proper assessment of asset quality. With limited practical knowledge about mergers, the central bank could adopt a cautious, step-by-step approach to avoid potential risks. However, under the PCA framework, troubled banks may have little choice but to comply with the merger decisions.
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