The Bangladesh Bank on Monday approved licence to the country's 61st commercial bank named Citizens Bank.
The new bank is coming at a time when several banks that started their journey in the past few years have not been able to spread their services outside Dhaka city.
"Considering the country's economy and type of businesses, it will be difficult for a new bank to survive without innovation," former governor of the Bangladesh Bank Dr Saleh Uddin Ahmed told The Business Standard.
He said 80% of people in the country are still out of the banking services. A bank can be successful if it can bring them under service, put more emphasis on the SME sector, and introduce a new type of business model to take services at the upazila and village level without focusing on the city.
Law Minister Anisul Huq is one of the shareholders of the Citizens Bank.
The minister's mother Jahanara Huq had applied for the licence of the bank. After her sudden death, the permission to change shareholding or ownership in the name of Anisul Huq was sought from the central bank. The approval was given at a meeting of the board of directors of the central bank on 26 October.
Former deputy governor Khandaker Ibrahim Khaled said so far, the banks that started journeys in the last few years failed to decentralise their businesses outside Dhaka.
The public banks are still providing services to rural people, he said. "Even if a private bank wants to open a new branch in any rural area, it would be difficult to make profit."
Both the former deputy governors think that considering the size of the country's economy, there is no need for so many banks.
Former finance minister AMA Muhith also made a similar observation in an exclusive interview with The Business Standard in December 2019.
"The number of banks is high, but it is usual when monetisation increases in a country. Look at the United States in the 1930s when there were more than 4,000 banks there. Now America has only five banks," Muhith said.
At the beginning of this year, the central bank gave policy approval to Bengal, Citizens and People's Bank on the condition of raising the paid-up capital to Tk500 crore within two years. At the approval stage, the paid up capital of the banks would be Tk400 crore.
Former vice-president of FBCCI and vice-chairman of Bengal Group Jasim Uddin's Bengal Bank recently started its journey officially after getting the license.
Bengal Group Chairman and also lawmaker from Awami League Morshed Alam is the current Chairman of Mercantile Bank.
Expatriate Awami League leader MA Kashem, hailed from Sandwip in Chattogram, applied for the People's Bank.
During the three terms of the present government, 14 banks have been approved. Among those, 12 banks have started their activities.
Farmers Bank was one of the new banks approved in 2013. The finance ministry had termed the bank, which was sinking due to irregularities, as a thunderstorm for the financial sector.
However, the government has kept the bank afloat by providing capital through four state-owned banks and the ICB to protect it from sinking.
In 2019, Farmers Bank changed its name to Padma Bank. At the end of September this year, out of Tk3,632 crore defaulted loans of the bank, Tk3,268 crore were bad loans.
In his interview, Muhith then told TBS: "There is no need to rename it Padma Bank, instead it should be merged with another bank."