The recent decisions taken in favour of merging five troubled banks in Bangladesh with the same number of financially sound lenders have drawn a lot of flak from different corners.

That's because developments centring reports of the merger decisions are slowly giving away the fact that these are being forced to come about instead of being voluntary as claimed by the Bangladesh Bank (BB).

In fact, the reactions of the associated bankers and directors, circumstances centring the meetings where the decisions were taken alongside protests in one case confirmed that these had been decided by the government and relayed through the central bank.

The central bank issued a comprehensive framework for mergers or amalgamations for banks and non-bank financial institutions on April 4, delineating a voluntary process and a forced one.

Troubled banks and lenders with a good performance record will be able to decide for themselves whether they would like to merge with each other by December this year, said the BB.

Troubled banks refer to those showing signs of financial weakness such as an unsustainable level of non-performing loans.

Afterwards, the central bank will identify banks for mergers as it deems fit and conduct the amalgamations under the Prompt Corrective Action (PCA) Framework from March next year.

Prior to the issuance of the guideline, three merger decisions were made public following separate meetings between top BB officials and the respective banks' managing directors and chairman. Afterwards, the remaining two merger decisions were announced.

The first "voluntary" merger decision was taken by the boards of directors of EXIM Bank and Padma Bank on March 14. EXIM Bank Chairman Md Nazrul Islam Mazumder later told journalists that they had decided on it as the government had "proposed" it.

The second and third decisions for the merging of Bangladesh Development Bank with Sonali Bank and Rajshahi Krishi Unnayan Bank with Bangladesh Krishi Bank came from a single meeting between the respective banks' managing directors and the central bank governor on April 3.

The Rajshahi Chamber of Commerce and Industry formed a human chain protesting the merger decision.

As for the fourth and fifth cases, officials of BASIC Bank and National Bank were not present in meetings where it was decided that they would be merged with City Bank and United Commercial Bank (UCB), respectively.

These two separate meetings were held between the central bank and the managing directors and directors of City Bank and UCB on April 8 and April 9.

The board of BASIC Bank sent a letter to the finance ministry on April 18 informing that they wanted to merge with a state-run bank instead of the privately-run City Bank.

Top officials of National Bank informed journalists that they were still in the dark about the merger decision and that it was taken without their consent.

National Bank Managing Director Md Touhidul Alam Khan told The Daily Star that the bank was now under pressure as depositors were rushing to withdraw funds from the bank.

Officials of UCB said they learned about the decision from the central bank and had neither sent such a proposal to National Bank nor received one from it.

UCB Managing Director Arif Quadri told this newspaper that the discussions were at the preliminary stage and the bank had not sent any formal proposal.

Forced mergers will not bring about any positive impact, according to the World Bank.

Forced bank mergers may be counterproductive if a thorough assessment of asset quality was not conducted beforehand, it said.

"A consolidation process will require careful assessment and prudent implementation of procedures to avoid weakening good banks acquiring bad banks."

An assessment of the asset quality of weak banks will be required, it said, in its Bangladesh Development Update launched earlier this month.

"Bangladesh should follow international practices in bank mergers," Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said.

"If required, the government can take support from the International Monetary Fund."

This leads to a question: What will be the most rational step for the central bank?

Since it has no practical knowledge about mergers, it could adopt a go-slow approach.

It could also undertake mergers one at a time to learn from trial and error and identify the best course of action instead of taking on multiple ones simultaneously.

But at the end of the day, troubled banks will have little to do as the banking regulator has the authority to forcefully bring about the mergers under the PCA framework.