The Bangladesh Bank has suggested Padma Bank – previously Farmers Bank – vigorously seek foreign investment to fund its activities.
In a letter to the Financial Institutions Division on 5 October, the central bank said it would be better if Padma Bank could fill its capital deficit by bringing in investments from abroad.
Earlier in September, the bank authorities had proposed a merger with any of the five state banks – Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, and the Bangladesh Development Bank.
The bank also sought cooperation from the finance ministry in managing Tk2,400 crore to maintain a minimum of 12.5% capital adequacy.
The Bangladesh Bank turned both proposals down in the letter sent to the ministry.
According to the letter signed by Bangladesh Bank General Manager Md Ali Akbar Faraji, the proposition of merger or raising capital from deposits are not a viable solution as it does not comply with the Bank Company Act 1991 and Company Act 1994.
The merger has to satisfy all the beneficiaries of both parties to be accepted.
"The state-owned banks themselves are facing various problems in the operation and management of banks, including high levels of defaulted loans and other financial indices," the letter read.
The Padma Bank authorities had sought foreign investment through US-based DelMorgan and Co to raise capital and received approval from the Bangladesh Bank on 2 August.
Established in 2013, the then Farmers Bank was nearing collapse for lending anomalies.
Four state-owned banks – Sonali, Janata, Agrani, and Rupali – and the Investment Corporation of Bangladesh had come up with a Tk715 crore bailout in 2018.
On 8 July, Padma Bank Managing Director Md Ehsan Khasru submitted a merger or acquisition proposal to the finance ministry.
Padma Bank resumed its journey in 2019, but its condition started to deteriorate later.
The bank's shareholder equity stood at Tk487 crore that year, which is expected to go down below Tk100 crore this year with a gradual fall, the bank's managing director said in an interview with TBS in September.