Staff Reporter :
EXIM Bank, a private sector commercial bank, yesterday decided not to merge with crisis-hit Padma Bank PLC.
The matter was disclosed on Tuesday at the Dhaka Stock Exchange (DSE).
On 23 December, Exim Bank’s board of directors sat in a meeting, where they decided not to go ahead and merge with Padma Bank, source confirmed.
Earlier on 14 March this year, after failing to get back to health with the government’s Tk1,700 crore bailout package, scam-hit Padma Bank was set to merge with another private commercial bank, Exim Bank, in the country’s first voluntary merger move.
At the time, Nazrul Islam Mazumder, chairman of Exim Bank and the Association of Bankers, Bangladesh (ABB), said the bank will run under the name of Exim Bank after the merger, rendering the Padma Bank’s name obsolete.
Since the agreement was signed, Padma Bank practically stopped collecting deposits. It is not giving new loans.
Old loan supervision and daily banking activities are going on at branch level, a Padma Bank official told the media, seeking anonymity.
Nearly nine months after the announcement and after the fall of the Sheikh Hasina government on August 5, Exim Bank withdrew from that decision due to change in circumstances, with Exim Bank informing it to their investors about the decision through the DSE on 24 December.
Padma Bank was initially launched as Farmers Bank in 2013 as a fourth-generation bank.
Among the fourth-generation banks, this bank was the first to experience a major financial scam within a few years of its inception.
In 2017, Chowdhury Nafeez Sarafat assumed the role of its chairman. But widespread irregularities had plagued the bank since the beginning, necessitating government intervention in early 2018.
To rescue the bank, state-owned Sonali, Agrani, Janata, Rupali banks and the Investment Corporation of Bangladesh (ICB) injected a capital infusion of Tk715 crore.
In addition, state-owned banks invested nearly Tk1,000 crore in Padma Bank through subordinated bonds and fixed deposits.
Despite these efforts, the bank’s capital erosion could not be mitigated due to its inability to recover non-performing loans.
At the end of 2023, Padma Bank’s outstanding loans amounted to Tk5,740 crore, of which Tk3,550 crore was defaulted, indicating a limited capacity for the bank to reimburse depositors. The default loan rate was nearly 47 percent as of June 2023.
A senior official from Padma Bank, speaking on condition of anonymity, said the bank is facing a liquidity crisis and unable to return customers’ deposits.
The bank currently holds over Tk6,000 crore in deposits. To ensure some return of these deposits to customers, the bank has requested liquidity assistance from the central bank.
Last week, Padma Bank, which is on the list of weak banks, sent a letter to the Bangladesh Bank, seeking Tk1, 300 crore liquidity support.
Padma Bank has requested assistance from the central bank to return deposits of customers and institutions.
Currently, the bank does not have enough funds to return deposits, and therefore, it is seeking liquidity support from the central bank.
