During the previous Awami League government, large sums from various government institutions were deposited in Padma Bank through political influence. At present, these deposits total about BDT 22 billion. Within just three years of starting operations, Padma Bank collapsed due to unprecedented loan scams, irregularities, and corruption. Its condition is worsening by the day. With a capital shortfall of around BDT 50 billion, the bank is now on the verge of bankruptcy. Against this backdrop, a meeting was held on August 11 at the Financial Institutions Division of the Ministry of Finance to determine the course of action for returning the deposits of various government institutions held by the bank. The meeting directed the bank to submit a complete roadmap for returning the deposits. However, officials believe that the chances of recovering the government institutions’ deposits from the troubled Padma Bank are slim.
Among the government bodies that deposited money in Padma Bank, the Bangladesh Climate Change Trust alone has BDT 8.99 billion. Other depositors include the Bangladesh Power Development Board (BPDB), Jiban Bima Corporation, Sadharan Bima Corporation, Titas Gas, Bangladesh Telecommunication Regulatory Commission (BTRC), Chattogram Port Authority, Mongla Port Authority, Bangladesh Infrastructure Finance Fund Limited (BIFFL), Islamic Foundation, and Narayanganj Dockyard and Engineering Works, along with several other government organizations. Altogether, 43 government institutions currently have around BDT 22 billion deposited in Padma Bank.
To determine measures for recovering the deposits of the Climate Change Trust and other government bodies stuck in Padma Bank, a meeting was held on Monday, August 11, presided over by Nazma Mobarek, Secretary of the Financial Institutions Division at the Ministry of Finance. It was informed in the meeting that the disputes between various government agencies and Padma Bank over the deposit amounts had been resolved through the intervention of Bangladesh Bank. Following this, the total deposits of 43 government institutions in Padma Bank stand at about BDT 22 billion. Padma Bank has already submitted a roadmap on how these deposits will be repaid, which Bangladesh Bank has reviewed. However, the roadmap is not complete. Therefore, the bank has been asked to provide a detailed and complete roadmap in the next meeting.
Sources at the Ministry of Finance said that given the current state of Padma Bank, it will not be able to return depositors’ money without capital support from the government. In addition to deposits from government entities, the bank also holds funds from the general public. If the funds deposited by government institutions cannot be recovered, public money might also be at risk. On the other hand, if the government provides capital support to the bank, that too will come from public funds. For this reason, the bank has been asked to present a complete roadmap to overcome the existing situation. They believe the next course of action can be decided once the roadmap is received.
Regarding the matter, Secretary of the Financial Institutions Division Nazma Mobarek told Bonik Barta, “In the meeting, discussions were held on how to recover the funds of various government institutions deposited in Padma Bank and what the roadmap could be.”
The Farmers Bank, a fourth-generation bank, started operations in 2013. Later, it was renamed to Padma Bank in 2019. The bank currently has a paid-up capital of BDT 11.16 billion. Deposits collected from government and private institutions, as well as individuals, amount to BDT 68 billion. The total amount of loans disbursed stands at BDT 63 billion, of which BDT 56.9 billion—90 percent of the total disbursed loans—are now classified as defaulted. As a result, the bank’s capital shortfall has reached BDT 49 billion.
Due to a liquidity crisis and continued losses, Padma Bank is unable to pay salaries and allowances to its officers and employees on time. Payments are being made in phases, and a large amount in salaries is still overdue. The bank has 60 branches and 14 sub-branches across the country, with 770 officers and employees.
Several officials of Padma Bank said that to reduce expenses, a decision has been made to close or merge 20 branches. Initially, the Gulshan branch will be merged with the Gulshan Corporate branch. The process of merging these two branches has already begun.
Former Home Minister Mohiuddin Khan Alamgir was made the Chairman of Farmers Bank at the beginning. However, as the bank repeatedly failed to return customers’ deposits, Bangladesh Bank intervened in 2017. The bank’s board of directors was restructured. At that time, Mohiuddin Khan Alamgir was forced to step down as Chairman. The Managing Director was also removed at the same time. After that, during the Awami League government’s tenure, one of the country’s most influential figures in the financial sector, Chowdhury Nafeez Sarafat, took over as Chairman of the board of directors. On January 29, 2019, the bank was renamed Padma Bank.
As per a decision of the Ministry of Finance, state-owned Sonali, Janata, Agrani, and Rupali banks, along with the Investment Corporation of Bangladesh (ICB), acquired 68 percent of Padma Bank’s shares. In return, these institutions had to inject BDT 7.15 billion in capital. But even that failed to improve the bank’s condition. During the Awami League government, several initiatives were also taken to save the bank in addition to the state capital injection. Proposals were raised to provide liquidity through foreign investment or to convert institutional deposits into preference shares, but none were implemented in the end. Even in March 2024, when Abdur Rouf Talukder was the Governor, an initiative was taken to merge Padma Bank with the private sector’s EXIM Bank. However, after the political change in the country in August last year, EXIM Bank’s board withdrew from that merger decision.
By virtue of his position, Padma Bank’s current Chairman is Md Shawkat Ali Khan, who is also serving as the Managing Director of the state-owned Sonali Bank. When asked regarding Padma Bank’s current situation, Shawkat Ali Khan told Bonik Barta, “There is hardly anything left of the bank. Along with deposits, the capital is also gone. Now the bank has no other operations except loan recovery. On behalf of the board, we have said that the money recovered from loans will be used to repay deposits. And instructions have been given to reduce the bank’s operating expenses.”
Shawkat Ali Khan further said, “In line with the decision of Padma Bank’s board and management, we sought liquidity support of BDT 35 billion from Bangladesh Bank. But the central bank has not provided any funds yet. We are also not aware of the central bank’s decision on the bank. In the interest of the country’s economy and banking sector, we are open to accepting any decision.”
Bangladesh Bank’s Executive Director and spokesperson Arief Hossain Khan said that Padma Bank will not receive any liquidity support for now. He told Bonik Barta, “As part of banking sector reform, Bangladesh Bank is moving toward mergers and acquisitions. Padma Bank has long been identified as a weak bank. It is also under consideration for merger by the central bank. Padma Bank’s name is not on the list for the first phase of mergers. It will come under consideration in the second phase. The bank has previously received capital injections and liquidity support. But the situation has not improved. So currently, the central bank has no plans to provide liquidity support to Padma Bank.”
Although government institutions have repeatedly sent letters to Padma Bank demanding the return of blocked deposits, no results have come. Mainly, to protect the interests of the bank’s owners, during the Awami League government, some symbolic efforts were made, but no effective steps were taken to return depositors’ money. After the current interim government took office, efforts were renewed to recover the blocked deposits of government institutions from Padma Bank. For this, on September 12 last year, at a meeting of the Council of Advisers chaired by Chief Adviser Dr. Muhammad Yunus, the issue of blocked deposits of government institutions, including the Bangladesh Climate Change Trust, was raised. At the meeting, it was decided to prioritize the liquidation of this money and to develop a clear roadmap through consultations involving Bangladesh Bank and representatives of all concerned parties. After that, the Financial Institutions Division and Bangladesh Bank began working to recover the deposits of government institutions from the bank.