Exim-Padma Bank merger to take at least 18 months

The planned merger of Shariah-based Exim Bank and struggling Padma Bank is likely to take between 18 months to two-and-a-half years to complete, according to central bank officials.

Yesterday, the two banks signed the letter of intent to merge, which is the very first stage of the merger.

Now, the banks will have to submit a formal application to the Bangladesh Bank with a copy of the scheme of merger with documents, The Daily Star has learnt from central bank officials informed with the proceedings.

The documents include the secured and unsecured debts. In the case of secured debts, particulars of the securities and their value have to be provided. The value of the property, the assets and the liabilities of the two banks must be furnished too.

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If the central bank is satisfied with the draft scheme, it will give the go-ahead to the merger, as per the existing guideline on merger and acquisition.

While there is a guideline for merger or amalgamation of banks and financial institutions from 2007, it needs to be updated for the current times. The updated guideline will be published soon, the BB officials said.

After examination of the draft scheme, the central bank will appoint auditors in those banks for the valuation of assets and liabilities, said BB Spokesman Md Mezbaul Haque yesterday.

There are some legal approval factors in the case of a merger of banks. Once those are obtained, the BB will give its final clearance.

"It will take some time to complete the process," Haque said, while declining to give a timeframe for the completion of the merger process.

Approval from the Bangladesh Securities and Exchange Commission is also needed because Exim Bank is listed in the stock market.

The existing BB guideline said that the banks will mutually agree to the valuation of the assets. If they cannot reach an agreement, the BB will play the role of a mediator and help resolve the differences.

The merger decision may be cancelled if they are not able to agree on the valuation of the assets and liabilities, the BB officials said.

Once the merger is approved by the central bank, the two banks will have to proceed to comply with other formalities as required under the Companies Act 1994.

They will have to file an application before the High Court and submit the scheme for merger.

After the approval from the HC, the merger of the two banks will be executed finally, the BB officials said.

Then, the assets and liabilities of Padma Bank will be considered as Exim Bank's assets and liabilities.

"Exim Bank has cast its fishing net in Padma river -- now, flocks of Hilsas will be caught," Nazrul Islam Mazumder, chairman of Exim Bank, told journalists after the signing ceremony of the letter of intent at the BB headquarters.

Depositors of Padma Bank will not suffer after the merger and the employees of the bank will not lose their jobs, he said.

Directors of weak banks will not retain their post after the merger; they will remain as shareholders, said Mazumder, also the chairman of the private bank owners' forum Bangladesh Association of Banks since 2008.

Exim Bank Managing Director Mohammad Feroz Hossain and Padma Bank Managing Director Tarek Riaz Khan signed the letter of intent for the merger in the presence of BB Governor Abdur Rouf Talukder.