Padma Bank’s SLR exemption extended till 2025

Highlights

• Bangladesh Bank board decided to rationalise the interest rates on deposits and lending of non-bank financial institutions 
• The central bank fined the state-owned Agrani Bank for providing a loan facility by concealing information of the Credit Information Bureau (CIB)

Padma Bank – previously Farmers Bank – has received an extension for three years to its partial exemption from maintaining statutory liquidity ratio (SLR) – a measure aimed at protecting the interests of depositors.

The private sector lender will be allowed to keep only 9.75% of SLR till December 2025 – down from the regular rate of 13% for all commercial banks.

The Bangladesh Bank board made the decision at a meeting on Sunday with its Governor Fazle Kabir in the chair where deputy governors, executive directors and senior officials were also present.

The central bank had earlier provided Padma Bank with the facility till December 2022.  

"Padma Bank has been suffering from various problems including defaulted loans for a long time," a senior official at the central bank, seeking anonymity, told The Business Standard.

"The institution is not able to keep the SLR with the central bank against its deposits. Besides, it is not making a profit. Therefore, it has been given time till 2025 to make a turnaround," he added.

According to a Bangladesh Bank report, Padma Bank's total outstanding loan is Tk5,794 crore and its 63.25%, or Tk3,664 crore, has been defaulted as of December 2021.

Meanwhile, the meeting decided to rationalise the interest rates on deposits and lending of non-bank financial institutions. However, the percentage has not been finalised yet, confirmed Sirajul Islam, executive director and spokesperson of the Bangladesh Bank.

The money market regulator had earlier capped the deposit and lending rates at 6% and 9%, respectively, which came into effect early in 2020.

According to sources, at the meeting, the central bank fined the state-owned Agrani Bank Tk5 lakh for providing a loan facility by concealing information of the Credit Information Bureau (CIB).

The bank had earlier applied to the Bangladesh Bank board seeking exemption from the fine, but the central bank did not take it into consideration.  

In addition, the CAMELS rating of six state-owned commercial banks as of June 2021 was presented at the board meeting.

CAMELS is an international rating system used by regulatory banking authorities to rate financial institutions.