B Mirror Report : A government initiative to merge Rajshahi Krishi Unnayan Bank (RAKUB) with Bangladesh Krishi Bank (BKB) has sparked concern among analysts and stakeholders, who fear the move may undermine region-focused agricultural financing and create fresh operational complications rather than resolving existing problems.

Regulators, however, highlight several potential benefits of the merger, arguing that it could expand farmers’ access to essential banking services such as credit, savings and remittances, particularly in rural and remote regions of the country.

According to officials, BKB Managing Director Sanchia Binte Ali has sought approval from the finance ministry to place a formal merger proposal before the central bank. While the Financial Institutions Division (FID) is currently reviewing the plan, experts note that consultations with key stakeholders especially farmers’ organisations and employee representatives have so far been limited.

Analysts argue that strengthening governance, improving loan recovery and implementing structural reforms within the existing framework may prove more effective than pursuing a full-scale merger. They also warn of growing uncertainty among employees regarding transfers, career advancement and job security.

The proposal received in-principle approval at the 854th meeting of the Bangladesh Krishi Bank board on April 25, 2024. Later, at another board meeting held on June 6, the board decided to seek guidance from the finance ministry to advance the merger process in what it described as the “greater national interest”.

Under the proposal, one of the motivations for the merger is RAKUB’s lack of foreign trade and remittance operations an operational gap that authorities believe could be addressed through integration with BKB.

However, a senior FID official said that by late 2025 and moving into 2026, the long-discussed merger has evolved from a proposed solution into what he termed a risky union of two “deeply insolvent institutions”.

“The FID will examine the proposal and take necessary action in line with existing laws, regulations and government procedures,” the official said, referring to internal documents.

Available data show that BKB’s capital shortfall stood at Tk 292.07 billion as of June 2025. A recent Tk 6.5-billion capital injection covers less than 2.3 per cent of the deficit, leaving the bank’s financial stability under severe strain.

Officials attribute the shortfall largely to BKB’s weakened loan portfolio, as the bank has only recently begun recognising long-standing bad loans. Its non-performing loan (NPL) ratio surged to 49.44 per cent of total outstanding loans by June 2025.

RAKUB is also financially stressed, with an estimated capital deficit of around Tk 25 billion. Critics liken the proposed merger to “tying two sinking ships together”, warning that it would merely combine massive volumes of non-performing loans rather than create a stronger institution.

The situation has already affected depositors, who reportedly face serious difficulties withdrawing funds for urgent needs such as medical expenses and education, often resulting in disputes at branch offices.

Analysts further caution that the deterioration of specialised agricultural banks poses a threat to national food security. As liquidity constraints and alleged mismanagement restrict credit to marginal farmers, many are being pushed towards informal moneylenders and high-cost microcredit providers.

Adding to the anxiety, the recently enacted Bank Resolution Ordinance 2025 has unsettled the financial sector. Critics argue that the ordinance grants the central bank sweeping powers that could potentially compromise depositor protection in efforts to rescue failing banks.

Bangladesh Krishi Bank was established in 1973, while Rajshahi Krishi Unnayan Bank was formed in 1986 following the division of BKB’s operations in the Rajshahi and Rangpur regions.

Despite criticism, authorities continue to emphasise the potential upside of the merger. If combined, the new entity would operate through 1,422 branches nationwide, forming the country’s largest specialised agricultural banking network.

Officials say this expanded footprint would improve access to banking services for farmers, particularly in rural and hard-to-reach areas. The proposal also cites expected gains such as better utilisation of human resources, a stronger capital base, increased investment capacity, and lower administrative and operational costs.

In addition, the merged institution is expected to improve risk management, monitoring and supervision, enhance service quality through better coordination, modernise agricultural banking operations, boost profitability, and contribute more effectively to inclusive economic growth and rural development.