Padma Bank wants to merge with state bank

Padma Bank, erstwhile Farmers Bank, has sought to merge with the state bank in its desperate effort to avoid further deterioration of its financial health, a finance ministry official said.

"We have recently received an application from the bank for merger," ABM Ruhul Azad, additional secretary of the financial institutions division of the finance ministry, told The Daily Star.

"No decision has been taken yet."

Contacted several times through mobile phones, Padma Bank Chairman Chowdhury Nafeez Sarafat and Managing Director Md Ehsan Khasru did not respond to The Daily Star for comment.

Established in 2013 as Farmers Bank, the lender became a hotbed for financial irregularities within less than three years of operation.

A senior BB official said the central bank had earlier taken different measures including restructuring the board and management of the lender to strengthen the financial health of the beleaguered bank.

The restructured board even renamed as part of its efforts to sweep the gross irregularities and loan scams under the carpet and get an image makeover.

Despite the fact that, the financial health of the bank has not improved anymore, he said.

Padma Bank has failed to show any sign of strengthening its financial indicators in recent years, which is why it try to get a merger with any state lender, the BB official said.  

More than Tk 3,500 crore was siphoned off from the bank between 2013 and 2017, found a Bangladesh Bank investigation earlier.

The bank fell in deep trouble after depositors, which included government agencies, started pulling out money in the wake of allegations of corruption against Muhiuddin Khan Alamgir and Md Mahabubul Haque Chisty, the then board chairman and chairman of the audit committee respectively, became deafening.

The two were forced to resign in November 2017, and the government stepped in to rescue the bank in 2018.

State-owned financial institutions Investment Corporation of Bangladesh, Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank bought 60 per cent stakes in the bank for Tk 715 crore. The bank took the name of Padma Bank.

The bank though is yet to get back on its feet despite a raft of measures by the government, including a ban on fresh loan disbursement for three-and-a-half years starting from January 2017.

In 2020, the bank managed to narrow down its losses to Tk 151 crore.

At the end of the first quarter of 2021, it faced a capital shortfall of Tk 382 crore, up from Tk 310 crore a quarter earlier, according to data from the central bank.

As of June this year, default loan in the bank stood at Tk 3,519 crore, which is 61.6 per cent of its total outstanding loans.

A year earlier, as much as 66.33 percent of its outstanding loans were soured ones: Tk 3,709 crore.