Padma Bank has taken up a set of plans to make a turnaround from its current sorry state, starting off with the rebranding of its name this year to restore depositors' confidence and brighten its image.
Gross irregularities and loan scams had left the bank—formerly known as Farmers Bank—saddled with a huge amount of default loans.
The state-run bank set a target to reduce the amount of default loan by 40 percent this year, said Md Ehsan Khasru, its managing director, while addressing the bank's annual business conference at The Westin Dhaka yesterday.
The total amount of default loans stood at Tk 3,184 crore at last year's end, which was 59.55 percent of the total loan, according to Bangladesh Bank data. Recovering the loans is the bank's highest priority and bad loans will be recovered through third parties, said Khasru.
He said the bank plans to sell bad loans amounting to Tk 1,000 crore to asset management companies which specialise in loan recovery and it has already sought approval from Bangladesh Bank. The bank will bring down its advance deposit ratio (ADR) by this year in line with the central bank's guideline, he said.
The ADR remained above 85 percent in the last two years and stood at 116.67 percent in December last year, central bank data shows.
The bank issued subordinated bonds amounting to Tk 1,000 crore to raise capital for meeting liquidity crisis. Already Tk 250 crore has been raised, said the top executive.
The bank is making a turnaround fast as depositors have started returning to park their money, he added. Bangladesh Bank Governor Fazle Kabir echoed Khasru on the priority being loan recovery. He said the bank would have to avoid aggressive lending and excessive spending.
The bank is going through an image rebuilding process so the management should stay alert so that no cheque is dishonoured, suggested Kabir, adding that the management and board would have to cultivate a corporate governance culture.
Finance Minister AHM Mustafa Kamal said no institution collapsed for money rather it was for management. A group of good people has taken the lead of the bank so it will be a safe bank for depositors, he announced. “We do not want any bank to fall,” said Md Ashadul Islam, secretary to the financial institutions division of the finance ministry. He said Padma Bank would be an example of how a falling bank can turnaround.
A group of big borrowers did not pay back their loans despite having the capacity, said Md Mosharraf Hossain Bhuiyan, chairman of the National Board of Revenue.
He said they piled up their loans to avail interest waivers and rescheduling facilities and the government should be alert of such borrowers.