Padma Bank can clean balance sheet on 2 conditions
Bangladesh Bank has allowed Padma Bank, albeit under two conditions, to list its accumulated loss as "intangible loss" so that it does not show up in its balance sheet, thereby enabling it to attract foreign direct investment (FDI).
Intangible losses are adverse consequences to property that are not economic in nature, including property related to social, cultural, unique, or resource-based values, including the loss of irreplaceable and unique historic and cultural features.
The accumulated loss of the erstwhile Farmers Bank now stands at around Tk 805 crore.
However, it has to be gradually adjusted from its net profit in the next 10 years, which includes a one year grace period, said a BB official.
Moreover, the bank has to bring in the FDI of $700 million for which it is being allowed to showcase a clean balance sheet.
The central bank granted the permission on January 4 following the bank's request.
Padma Bank signed a memorandum of understanding with DelMorgan & Co, a US-based investment bank, in September last year to manage FDI from different interested companies.
Samir Asaf, managing director of DelMorgan, met with BB Governor Fazle Kabir yesterday to discuss the issue. The investment bank has proposed to bring in foreign investment of $700 million for Padma Bank.
The private lender will have to show its balance sheet as transparent in order to attract the FDI.
Padma Bank's capital shortfall stood at Tk 540 crore as of September 2021.
Default loans surged to Tk 3,586 crore, which is 62.4 per cent of its outstanding loans.
Around three years ago, the government rescued the lender from collapse in the wake of massive financial irregularities.
Five state-run financial institutions, namely the Investment Corporation of Bangladesh, Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank, injected Tk 715 crore into the bank to acquire 60 per cent of its stakes. Established in 2013 as Farmers Bank, the lender had fallen prey to scammers. A Bangladesh Bank investigation found that more than Tk 3,500 crore was siphoned off between 2013 and 2017.