Padma Bank gets BB approval to resume loan disbursement

Padma Bank has been given the Bangladesh Bank’s approval to resume loan disbursement three years and a half after its suspension due to the banks’ loan scams.

“Recently we got an approval letter from the Bangladesh Bank (BB) on disbursing loans,” the bank’s managing director Md. Ehsan Khasru told Dhaka Tribune. 

“Now we are working on distributing loans among good borrowers,” he added.

The BB sent the approval letter on August 26 to the managing director of the bank, said a high official of the BB, seeking anonymity. 

He said Padma Bank (a rechristening of the scam-hit Farmers Bank) would be able to provide loans on a limited scale because the BB had set the ADR (Advance to Deposit Ratio) at 60% for the scam-hit bank. 

For instance, the bank could now lend up to 60% of its total deposits, in contrast to 87% justified for a conventional bank, he added.

The BB had suspended the bank’s lending activities in January 2017 due to massive irregularities in its operations.  

Following the suspension, the bank had applied to the Bangladesh Bank for permission to disburse loans but the BB refrained from acting for the last three and a half years.

The BB’s investigations had found massive irregularities in Farmers Bank’s loan disbursement three years after the bank came into being in 2013. 

Some unscrupulous borrowers plundered more than Tk3,500 crore from the bank with the help of a number of directors of the bank, says the BB probe report.

The bank’s chairman Muhiuddin Khan Alamgir and audit committee chairman Md Mahbubul Haque Chisty were forced to resign in November 2017 due to the scam. 

In 2018, the government came forward to save the bank from its dire condition. The state-owned financial institution Investment Corporation of Bangladesh, Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank bought 60% stakes in the bank. The stakes were valued at Tk715 crore.

In February 2019, the bank was renamed Padma Bank as a move to recover its tarnished image.  

At the end of August this year, the bank’s deposits stood at Tk5,900 crore and loans at Tk 5,560 crore. 

As of June this year, the bank’s NPLs stood at Tk3709.41 crore or 66.33% of its total disbursed loans. 

Talking to Dhaka Tribune, the bank’s managing director Md Ehsan Khasru said the management of the bank was trying to recover the money. It had filed about 400 cases with the Artha Rin Adalat against the defaulters.