The proponents of the new banks argue that the new operators will infuse more competition into the banking industry and thus bring benefits to the clients. "The (Bangladesh Bank) Board has finalized a set of guidelines including new conditions with the older regulations," said A F M Asaduzzaman, a deputy general manager in the governor's office. "The old regulations have been amended substantially.
Later, a senior official who did not want to be named said the new banks would require a minimum paid-up capital of Tk 400 crore from its sponsors. "And in three years, they have to go public," said the official, who attended the Board meeting, "and raise an amount equal to the paid-up capital." The official said the new guidelines took a tough line against "loan and tax defaulters" and would not allow anyone even with a family member having such a record.
Those criticizing the move say the already overcrowded market does not need new ones and that the initiative is designed to dole out favors to political friends. Two former governors have locked horns over the issue, with Mohammed Farashuddin backing it while Salehuddin Ahmed denouncing it.
The finance minister, A M A Muhith, has already responded to the debate saying that it is a "political decision" to create new banks. Asked, whether any politician would be benefited from the initiatives, he told a reporter on July 24: "Maybe, I don't know." Muhith did not say how many new banks will be allowed. The minister had earlier announced in parliament that the government would issue new banking licenses despite strong insistence from the central bank that no more banks were necessary.
There are 47 banks operating in Bangladesh, alongside hundreds of other financial services companies. The last time new banks were created was during the 1996–2001 Awami League rule. Since then, the central bank has received 82 applications for licenses. Of them, 20 have been filed since the Awami League returned power in Jan 2009. The Sheikh Hasina government has recently established a new bank for the welfare of expatriates. The prime minister has announced setting up of another with expatriates' capitals.After the independence, the number of banks in the country had been six. The country had gotten first private banks after privatisation of Pubali and Uttara banks during military strongman Hussein Muhammad Ershad's regime. Ershad took the number of private banks to nine. BNP, between 1991 and 1996, gave permission to another eight.
The 1996-2001 Awami League set up as many as 13 more.
