"The bad performing banks should merge with other banks before creating panic among the public and any delay will put pressures of depositors and bad loans on the government," he told reporters after addressing an award-giving programme organised by Bankers' Forum at the CIRDAP auditorium.

"We have yet to introduce the system like merger or take over. But the banks which are now in danger will have to take the alternative to avoid any disaster and the Bangladesh Bank will have to act properly," he said.

Without mentioning the names of bad performing banks, the leading economist said these banks have been facing troubles since the beginning due to bad loan culture.

"Though these banks are doing well in new loan, sponsor directors have failed to maintain their standard of morality in running the banks," he said.

Earlier, addressing the award-giving programme as chief guest he said some local banks are doing well and even competing with international banks.

But the situation was not vibrant 15 years ago when both nationalised and private banks were suffering from different problems, he said, adding that in the past, one third of the private banks' loan was taken by their sponsor directors and in some cases in fictitious names.

Situation in the banking sector has improved, he said, adding, "There is almost no fictitious loan in private banks and it is now below two per cent of the total loan of private banks."

The governments in past 15 years genuinely tried to bring reforms in the banking sector whatever their efforts in other sectors have been, he said.

He, however, observed that the sector needs more reforms.

There are one or two banks where depositors' deposits are not safe, he said.

This is urgent for the banks to merge with others or the government should take over them, he said, adding, "This is a matter of political decision."

As there is little possibility of these banks' going for merger in the immediate future, the next government will have to form a bank reform committee to resolve the problems, which would suggest either merger or take over, he said.

"We will have to draft a regulatory framework to bring the bad performing banks on right track," he said.

Criticising foreign consultants' roles in reforming the banking sector, Prof Wahiduddin said foreign consultants have failed to bring any positive result in the banking sector. He suggested that the government emphasise home-grown policy in reforms of the banking sector.

About separate pay scales for nationalised banks and the Bangladesh Bank, he suggested downsizing the manpower and improving their skills before introducing separate pay scale.

Earlier, Prof Wahiduddin Mahmud distributed Bankers' Forum Award 2005 to Square Pharmaceuticals, Dutch Bangla Bank, Standard Chartered Bank, Khandker Ibrahim Khaled, Managing Director of the Pubali Bank and Birdem founder Dr Muhammad Ibrahim (posthumous).

Bankers' Forum President Ibrahim Khaled presided over the programme.