Bangladesh Bank yesterday showcased a rare regulatory forbearance, waiving a Tk 89 crore fine which had been slapped on Padma Bank.

The bank was penalised for failing to maintain the stipulated statutory liquidity ratio (SLR) with the central bank between October 2017 and December 2019.

The bank faced a total penalty of Tk 144 crore during the period as it had also failed to maintain the required cash reserve ratio (CRR).

The central bank issued a notice to this end yesterday informing all banks.

The CRR is a minimum proportion or percentage of customers' deposits banks have to keep with the central bank in the form of cash. Similarly, the SLR is a percentage of deposits kept in the form of government securities.

The CRR and SLR mainly safeguard the money depositors keep in a bank.

Banks now have to keep 4 per cent and 13 per cent of their total clients' deposits with the central bank as the CRR and SLR respectively as per the rules.

The central bank may also waive the rest of the penalty, amounting to Tk 55 crore. Padma Bank recently applied to the central bank requesting to waive the whole penalty.

But the central bank is not allowed to waive such penalties, as there is no clear provision to this end in the Banking Companies Act 1991.

Against this backdrop, the central bank had raised the issue at its board meeting on December 7 where it was decided to forward the issue to the finance ministry, said a central bank official.

The central bank has taken the decision of waiving the penalty after getting the green signal from the ministry.

"Such type of waiver is rare. The last time the central bank granted it was for Oriental Bank, which later restructured its corporate profile and was renamed ICB Islamic Bank in 2008," he said.

Padma Bank Managing Director Md Ehsan Khasru said they applied to the central bank requesting to waive the penalty, which had been imposed before 2018.

The waiver will help improve the financial health of the lender, he said.

"This will give a boost to our profitability as well," he said.

Initially starting its journey as Farmers Bank, the lender later renamed itself as Padma Bank in a bid to sweep gross irregularities and loan scams under the carpet and get an image makeover.

The bank, which was established in 2013, became a hotbed for financial irregularities in less than three years of operations. More than Tk 3,500 crore was siphoned out from the bank, according to the central bank's probe reports.

As of December 2020, default loans at the beleaguered bank stood at Tk 3,455 crore, or 61.6 per cent of its total outstanding loans.

Muhiuddin Khan Alamgir and Md Mahabubul Haque Chisty, the then board chairman and chairman of the audit committee respectively, were forced to resign in November 2017 due to their alleged involvement in the financial corruption.

Allegations of corruption against them became deafening and depositors, which included government agencies, started pulling out their money.

This prompted the central bank and the government to step in and rescue the bank.

Four state-owned commercial banks -- Sonali, Janata, Agrani and Rupali -- and the Investment Corporation of Bangladesh bailed out the bank buying equity shares worth Tk 715 crore.

Managing directors of the five financial institutions were appointed directors of the bank.