The government's reform initiative in the chronically underperforming financial sector is gaining some momentum. Having belatedly, but finally, come around to the need for consolidation in what is a highly fragmented industry, i.e. banking, we can recall how the central bank misfired in some of its communication efforts earlier. In particular, its rhetoric on forcing mergers between 'good' and 'bad' banks caused a considerable amount of discomfort among the industry's sponsor directors. Which is why the guideline for mergers that it promised should have actually come out with the announcement of the policy itself. Anyway, better late than never, as they say.

Shapla Chattor, in a circular this week, did come up with the guideline. And the earliest reactions suggest it has acted to calm nerves. Moreover in the wake of its release, two more planned mergers came to light, to go with the one announced earlier between Padma Bank, which has probably tried every trick in the book with even a remote possibility of turning around its fortunes by now, and quite a few from outside it as well, dating all the way back to its birth as the erstwhile Farmers Bank. It was beset with problems from the start. Even installing Chowdhury Nafeez Sharafat, seen as something of an international financial whiz within the AL hierarchy, as chairman failed to have the desired impact. The announcement of its merger with EXIM Bank came shortly after Sharafat was forced to step down as chairman of Padma. Whether or not the right choice was made on that occasion will always ignite debate.

I was actually starting to think the policy had been quietly railroaded, but now Bangladesh Bank finds itself in the enviable position of running ahead of schedule. Mezbaul Haque, the executive director who acts as the spokesperson for the central bank, had earlier revealed it was planning to merge 10 banks within a year, or by the end of 2024. With the state-run Bangladesh Development Bank announcing it was set to merge with Sonali Bank and Rajshahi Krishi Unnayan Bank announcing similar plans to be taken over by Bangladesh Krishi Bank, we already have 6 banks starting out on the protracted path to becoming one. Even if he meant 10 mergers involving 20 banks, Bangladesh Bank is ahead of the required run rate. Now if it can only play out these middle overs with greater assurance than the batsman in our cricket team, there is every possibility of 2024 turning out to be a great year for the regulator.

The guideline meanwhile, addresses some of the apprehension caused by the earlier rhetoric effectively. For example, in an effort to project how seriously they were approaching the implementation of the policy, the central bank had in effect issued the veiled threat of forcing some mergers, especially in cases where the latest stress tests (to gauge a bank's stability and ability to withstand sudden shocks) for the banking sector revealed chronic weaknesses that left no other option but to agree to be taken over by a 'strong bank'. Notice the change from 'good' and 'bad' when talking about it to 'strong' and 'weak' in the guideline itself. A commendable shift. What would be even more commendable now, would be to stay the course and finish the job of consolidating the banking industry. At least some of the early momentum suggests it might just do so this time.