Padma Bank seeks waiver of Tk 144cr fine
Padma Bank has applied for a rare regulatory forbearance, requesting that Bangladesh Bank waives its penalty of Tk 144 crore.
The penalty was imposed for the bank's failure to maintain the stipulated cash reserve ratio (CRR) and statutory liquidity ratio (SLR) with the central bank.
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.
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.
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 the 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.
If the ministry allows, the central bank can waive the penalty, he said.
"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 did not face any CRR and SLR shortfall after it was reshaped from its former state as "Farmers Bank", said Khasru.
"But we are facing the aftermath of its legacy," 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 operation. More than Tk 3,500 crore was siphoned out from the bank, according to the central bank probe reports.
As of September 2020, default loans at the beleaguered bank stood at Tk 3,632 crore, or 65 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.