Just four years after it began operating in 2013, The Farmers Bank was brought to its knees by irregularities and corruption. Set up at the behest of a former home minister and approved on political grounds, the lender was bailed out by the central bank in a bid to keep it afloat. Bangladesh Bank restructured the board, changed the bank’s name, injected capital and offered unprecedented policy support. None of it worked.
Over the past eight years, the bank has posted a net loss of BDT 60.99 billion — a sum larger than its total assets. The bank, established at the initiative of former Home Minister Mohiuddin Khan Alamgir of the Awami League, has since become a burden on the government and the state.
The Farmers Bank was renamed as Padma Bank on January 29, 2019. Economists and central bank officials say the initial mistake was trying to salvage the lender at all. Liquidating it or forcing a merger back then, they argue, would have cost the central bank and the government far less. Now if authorities try to wind it up, the government will be left to cover its massive accumulated losses and capital shortfall — a cost that would have to be met with taxpayers’ money. But experts now urge not to put the decision off any longer, or the losses and liabilities they warn will grow bigger.
According to Padma Bank’s own data, it held deposits of BDT 63 billion at the end of last year. Its disbursed loan amounted to BDT 56.5 billion, of which BDT 52 billion — or 93 percent — was classified as non-performing.
The bank has run chronic losses for a decade. By the close of last year, its accumulated losses had reached BDT 60.99 billion. At the same point it had a capital shortfall of BDT 49.65 billion.
Back in 2019, state-owned Sonali, Janata, Agrani and Rupali banks, together with the state investment corporation ICB, injected BDT 7.15 billion of fresh capital into Padma Bank. On top of that equity, the four major state-owned banks have BDT 8.5 billion in term deposits placed with Padma and a further BDT 500 million parked as call money. The investments, made on the instructions of the now-ousted former Prime Minister Sheikh Hasina, have yielded not a single taka in profit for the state-owned banks in seven years. Government entities have deposited nearly another BDT 25 billion with Padma. That money, too, the bank is now unable to return.
Before it even had a licence, The Farmers Bank began hiring staff in 2013 on the initiative of its founder, the former Home Minister Mohiuddin Khan Alamgir. A central bank investigation later found that jobs were sold in exchange for bribes. Many of those recruits still work at Padma Bank today. It employs roughly 1,000 officers and staff across its 60 branches and 14 sub-branches, most of whom have little or no work to do. Lending and deposit-taking have been virtually frozen since 2017. The bank has simply paid salaries to idle employees for years, burning through the deposits placed by state-owned banks to cover office rent, wages and operating costs. Now it cannot even meet its payroll, and rent is said to be in arrears for many branches.
Fahmida Khatun, an economist, said there is no case for keeping Padma Bank going in its current state. “We have been calling for two or three years for a tough decision on Padma Bank and other such inactive lenders,” she told Bonik Barta. “Propping up a bank with government funding makes no sense. Padma Bank has played no role in the economy or the financial sector for many years. So why keep it alive with public funds? The time has come for a hard decision on Padma and other banks mired in corruption and malpractice.”
Khatun, who is also the executive director of the Centre for Policy Dialogue (CPD) and now a member of the central bank’s board, was asked why no decision on Padma Bank was taken during the tenure of the recently dissolved interim government. The economist replied, “The board also discussed state-owned and private banks facing conditions similar to those of Padma Bank. But we started by merging five Shariah-based banks first. The government lacks the money and capacity to tackle so many banks at once. That said, past inaction can’t justify sitting idle now. It’ll be the responsibility of the elected government to take hard decisions on weak banks as part of financial-sector reform.”
Mohiuddin Khan Alamgir was initially the chairman of The Farmers Bank. The bank’s other sponsors and directors were also close to the Awami League. Its name was mired in disputes even before it began operation in 2013. By 2017, it failed to return depositors’ money, prompting Bangladesh Bank to step in. The board was restructured. Alamgir was forced to give up the chairmanship; the managing director was removed at the same time. Chowdhury Nafeez Sarafat, then one of the most influential figures in the country’s financial sector, took over as chairman — though he had been a director since the bank’s earliest days.
The bank was renamed as Padma Bank on January 29, 2019. Under a finance ministry decision, 68 percent of its shares were transferred to the four state-owned banks and the state investment corporation ICB. Those institutions in return had to inject BDT 7.15 billion of fresh capital. Yet the bank never turned itself around.
During the past Awami League government, several other rescue plans were floated including liquidity from foreign investors and converting institutional deposits into preference shares. But none was implemented. As recently as March 2024, when Abdur Rouf Talukder was governor, the central bank tried to engineer a merger with private-sector Exim Bank. After the student-led mass uprising, Exim Bank’s board backed out. Exim subsequently merged with the Sammilito Islami Bank instead.
Padma Bank asked the central bank for another BDT 35 billion in liquidity support in September last year to keep itself afloat. Bangladesh Bank ignored the request.
The bank’s chairman is now Md Shawkat Ali Khan, who holds the post ex-officio by virtue of his role as managing director of state-owned Sonali Bank. Asked about Padma’s current position, he told Bonik Barta there was “virtually nothing left” of the lender. “Deposits and capital are exhausted. Accumulated losses now exceed its assets and liabilities. Officers have little to do except recover loans. Management was ordered long ago to cut costs, but not enough. We invested in Padma Bank on government instructions. It’s now up to the central bank and the government to decide its future.”
Through political influence, Padma Bank was forced to accept deposits from state-owned entities since its inception. Repaying that money has since proved impossible. The Bangladesh Climate Change Trust alone has BDT 8.99 billion stuck in the bank. Funds belonging to the Bangladesh Power Development Board (BPDB), the two state insurance corporations, Titas Gas, the telecoms regulator BTRC, Chittagong and Mongla port authorities, the infrastructure finance fund BIFFL, the Islamic Foundation, Narayanganj Dockyard and several other public agencies are also trapped. In total 43 government bodies now have roughly BDT 25 billion on deposit with Padma. Not a single taka of that money has been recovered despite repeated efforts over eight years.
The central bank agrees that liquidation is probably the only option. Arif Hossain Khan, an executive director and spokesman for Bangladesh Bank, told Bonik Barta: “No one will want to take over Padma Bank in its current state. Its bad loans, losses and capital shortfall are too big. Most of the non-performing loans were disbursed to shell companies using proxy names. The real beneficiaries of those non-existent firms can’t even be traced now. The staff have virtually nothing to do. In this situation we have no alternative but to wind it up. An elected government and a new governor are now in place. I hope we can reach a decision on Padma Bank.”