To all appearances, the private bank, the Padma Bank (PB), a restructured and renamed version of the former Farmers Bank, has not been able to rid itself of the not-so-glorious legacy from which it emerged. Though some of its top executives would have us believe otherwise, question remains about PB's present financial health. As could be learnt from an exclusive report published in this paper on Monday, August 21, the bank has failed to pay back Bangladesh Telecommunication Regulatory Commission's (BTRC's) term deposit worth Tk254 million, placed with different branches of the bank. Failing to get back the money even after repeated reminders to PB's senior executives since the deposit reached maturity in December 2017, the BTRC sought Bangladesh Bank (BB)'s intervention, though with no result so far. Interestingly, it is the BB that has kept PB afloat so far through providing all kinds of facilities and waivers. For example, to help out the crisis-ridden bank, the BB for the second time in June last year, issued a circular permitting it to keep an amount of liquid asset (Statutory Liquidity Ratio, SLR) that is far lower (at 3.25 per cent) than what is mandatory. Whereas, as the BB's standard rule goes, a bank should maintain 13 per cent of its cash equivalent assets as SLR. In the process, the bank was also exempted from paying an enormous sum of fine for its failure to maintain the required SLR. In the same manner, the fine accruing from the bank's inability to maintain the requisite amount of Cash Reserve Ratio (CRR) with the BB was also drastically reduced.
It may be recalled at this point that prior to its makeover, the Farmers Bank was a hotbed of gross irregularities including corruption, mismanagement and financial scam. As a result, according to the BB, more than Tk35 billion was siphoned off from the erstwhile Farmers Bank. Even before the mentioned SLR-related exemption, the bank was salvaged from collapsing, thanks to the government's intervention. In fact, four state-owned banks and the Investment Corporation of Bangladesh (ICB) were made to inject Tk7.15 billion into the bank through buying 60 per cent of its stakes. Evidently, Padma Bank has been carrying many of its hereditary defects. So, it is not surprising that the bank is now failing to pay back the fixed deposit that the BTRC held with it.
In fact, it was due to the government's unprecedented decision that the nine new private banks including the PB (its antecedent Farmers Bank, to be exact) were launched in 2013 and have been struggling since their birth. Obviously, it was not economic, but political exigency that lay behind so many new private banks' emergence. So, despite their incapacities to perform, they are being made to run at the expense of the public exchequer. Unsurprisingly, Moody's, a top global rating agency in March this year, downgraded the country's banking sector's rating.
Expressing its serious concern about rising volume of bad debts, the International Monetary Fund (IMF) has also asked the government to reform the banking sector. The rot has gone deep into the overall banking system. The government and the banking sector regulator - the Bangladesh Bank - are also aware of the current state of the sector. What is needed most are the right actions on their part to stop recurrence of unsavoury incidents like banks' failure to pay back to their depositors.
