Padma Bank, facing financial difficulties, is struggling to pay its employees
Padma Bank, previously known as Farmers Bank, has fallen into severe financial trouble, struggling to pay its employees' monthly salaries. The bank has requested a Tk 5,000 crore bailout package from Bangladesh Bank to remain operational.
Since August of last year, Padma Bank's approximately 850 employees have been receiving their salaries, but with restrictions on withdrawing the full amount at once. They can only access their pay in installments. Additionally, incentives have been suspended for years, and promotions have been put on hold since last year, according to bank officials who requested anonymity due to fear of retaliation, as reported by The Daily Star.
The bank spends about Tk 5-6 crore monthly on salaries, while it recovers around Tk 14-15 crore from borrowers, according to internal data. From the recovered funds, the bank repays small depositors and covers employee salaries, as explained by Kazi Md Talha, the bank’s acting CEO, last week.
To address its liquidity crisis, Padma Bank requested a Tk 5,000 crore bailout from Bangladesh Bank in January, but the central bank has yet to respond.
“If we receive the funds, we can repay both individual and institutional depositors,” Talha stated. Padma Bank, which was granted its license in 2013 due to political considerations, has faced financial irregularities since its inception. Over Tk 3,500 crore was misappropriated from the bank within its first three years.
As of September last year, the bank’s defaulted loans totaled Tk 4,856 crore, which accounts for 86% of its total disbursed loans, according to Bangladesh Bank data.
Major defaulters include Mass Shipping Recycling Industries (Tk 140 crore), Nahar Agro (Tk 60 crore), Apollo Engineering (Tk 80 crore), Mim Jute (Tk 60 crore), and East West Properties (Tk 60 crore), which is part of the Bashundhara Group.
The bank also recently rescheduled Tk 83 crore in loans for Meghna Cement, another Bashundhara Group concern, and saw Tk 23 crore of loans from Beximco Group default in the December quarter.
For years, Padma Bank has failed to return depositor funds, with unpaid deposits totaling Tk 6,100 crore. The bank owes significant sums to several corporate depositors, including Tk 722 crore to the Bangladesh Climate Change Trust Fund, Tk 182 crore to the Chittagong Port Authority, Tk 153 crore to the Investment Corporation of Bangladesh, Tk 109 crore to Bangladesh Jiban Bima Corporation, Tk 68 crore to the Mongla Port Authority, Tk 58 crore to Titas Gas Transmission & Distribution, and Tk 80 crore to the Bangladesh Infrastructure Finance Fund.
The bank, which has been incurring losses since 2017, currently has a deficit of Tk 235 crore in its current account with the central bank.
Padma Bank’s financial situation worsened after it was included in the Awami League-led government's plan to merge 10 weak banks with stronger institutions in March last year. This caused panic among depositors, leading to a significant increase in withdrawals. Since then, about Tk 600 crore has been withdrawn from the bank.
After the fall of the Sheikh Hasina-led government in August, the planned merger of Padma Bank with the Shariah-based EXIM Bank was canceled.
“Padma Bank was not as weak as some Shariah-based banks, but its financial condition worsened after the merger announcement,” Talha explained.
The uncertainty around the merger led to an exodus of employees, with around 200 temporary staff, hired for loan recovery efforts, leaving the bank, along with about 30 permanent employees.
Bank officials acknowledged that recovering defaulted loans is a challenge, as many were issued through fraudulent means and irregularities.
Padma Bank's financial troubles date back to 2015-16 when the central bank uncovered massive irregularities. In response, the bank's ownership and management underwent significant restructuring in 2017 after Muhiuddin Khan Alamgir, a former presidium member of the Awami League, resigned as chairman.
To prevent the collapse of Farmers Bank, the government intervened with financial support, and state-owned institutions, including ICB, Sonali, Janata, Agrani, and Rupali Banks, collectively acquired a 60% stake for Tk 715 crore.
In January 2018, Chowdhury Nafeez Sarafat, chairman of RACE Asset Management, took over as chairman, and the bank was rebranded as Padma Bank in 2019 in an effort to restore its credibility. However, the bank continued to be plagued by its past scandals.
Sarafat stepped down as chairman in January last year.
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