Foreign investments

Central bank suggests Padma seeking foreign investment

The Bangladesh Bank has suggested that Padma Bank – formerly Farmers Bank – vigorously seek foreign investment to finance its activities.

In an Oct. 5 letter to the Financial Institutions Division, the central bank said it would be best if Padma Bank could fill its capital gap by bringing in investment from abroad.

Earlier in September, the banking authorities proposed a merger with one of the five state-owned banks – Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank and Bangladesh Development Bank.

The bank also sought the cooperation of the Ministry of Finance to manage Tk 2,400 crore to maintain a minimum capital adequacy of 12.5%.

The Bangladesh Bank rejected both proposals in the letter sent to the ministry.

According to the letter signed by the Managing Director of the Bank of Bangladesh, Md Ali Akbar Faraji, the proposal to merge or raise capital from deposits is not a viable solution because it is not in line with the Bank Company Act 1991 and the Company Act 1994.

The merger must satisfy all beneficiaries of both parties to be accepted.

“Public banks themselves face various problems in the operation and management of banks, including high levels of delinquent loans and other financial indices,” the letter said.

Padma Bank authorities had solicited foreign investment through the US company DelMorgan and Co to raise capital and received approval from Bangladesh Bank on August 2.

Established in 2013, the then Farmers Bank was on the verge of collapse over credit anomalies.

Four state-owned banks – Sonali, Janata, Agrani and Rupali – and the Investment Corporation of Bangladesh had proposed a Tk 715 crore bailout in 2018.

On July 8, the Managing Director of Padma Bank, Md Ehsan Khasru, submitted a merger or acquisition proposal to the Ministry of Finance.

Padma Bank resumed its journey in 2019, but its condition started to deteriorate later.

The bank’s equity stood at Tk 487 crore that year, which is expected to drop below Tk 100 crore this year with a gradual decline, the bank’s chief executive said in an interview with TBS. in September.