World Bank for merger of BKB, RAKUB
Insists on timetable for divesting govt stakes in the specialised banks
Md Hasan
The World Bank (WB) has suggested merger of two state-run specialised agricultural banks, Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB), for the banks' effective functioning as rural credit providers.Stressing the need for merger of the two banks, a recent WB report remarked that the cost of rehabilitation would also be minimised on such an initiative. It also recommended a medium term privatisation plan of the banks and asked the government for setting a timetable for divesting its remaining stake in BKB and RAKUB and also for a criteria for investors and evolving mechanism for such divestment. According to the sources in the international lending agency, a mission visited Bangladesh in last April and discussed the findings and recommendations put forward by a study on access to rural finance. The WB looked into the whole spectrum of financial institutions, including BKB and RAKUB, nationalised and private commercial banks and micro finance institutions (MFIs). The WB mission placed all of its recommendations on rehabilitation of the two specialised agricultural banks to the government and another mission is due in Dhaka next month to set out a pre-appraisal of the proposed access to rural finance project. Arguing for the BKB-RAKUB merger, the WB said a combined bank could use a single information technology (IT) package to support new system. Conducting the rehabilitation process would reduce the management challenge involved in the process, it said. The World Bank said the rehabilitation cost could be reduced significantly if the two are merged. It has estimated that $1394 million would be required for rehabilitation as realistic cost and $1266million as optimistic net cost. Of the amount, each bank will require $5million for management and operations support. And a total of $35million has been estimated to install new IT system for both the banks. However it said the cost for IT system installation could be reduced by around $10 million in case of merger of the banks. Under the access to rural finance project, the World Bank recommended reforms in BKB and RAKUB and transforming them into profitable banks targeting rural small and medium enterprises (SMEs) and small farmers. It recommended a thorough diagnostic of the financial and operational performances, a detailed recapitalisation plan to reduce the fiscal burden and development of new business plans for the two specialised banks.
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