Padma Bank set to shut down

Padma Bank PLC, formerly Farmers Bank, has been struggling for the past 10 years. The bank has been caught in a liquidity crisis since then. Despite various measures taken over the years, there has been no improvement. Instead, its sponsors took loans indiscriminately under different names. Minimum regulations were not followed and the bank was subjected to widespread embezzlement.

To rescue the bank from this fragile situation, its name was changed to Padma seven years ago. At the direction of the then government, various state-owned banks and financial institutions invested nearly Tk 7,000 crore in the bank. Even this failed to bring any positive change. Almost the entire amount was allegedly siphoned off again through irregularities and corruption. As a result, more than 90 percent of the bank’s loans have become classified. Overall operations have come to a standstill.

In this situation, the central bank has made an initial decision to shut down or liquidate the bank.

Sources at Padma Bank and Bangladesh Bank said the bank’s board of directors held a meeting with Bangladesh Bank last Thursday. The overall situation was discussed at the meeting. However, no solution could be found to revive the bank. The initial decision was then made to liquidate Padma Bank to address its crisis.

The proposal will be placed before the central bank’s board of directors for approval this month. If approved, the process of shutting down the bank will begin through the banking resolution process. If such a decision is taken, it will be the first bank liquidation in the country’s history. Under the provisions of the law, an affected customer of the bank will receive a maximum of Tk 2 lakh under the deposit insurance law.

Bangladesh Bank spokesperson and Executive Director Arif Hossain Khan told Agamir Somoy on Thursday that given the bank’s current fragile condition, no institution or bank would voluntarily want to take responsibility for or control Padma Bank. The bank’s bad loans, accumulated losses and capital shortfall are so large that overcoming them through the normal process is impossible. In the current situation, keeping Padma Bank afloat or merging it with another bank is extremely difficult. Considering everything, there is no alternative to winding up or liquidating the bank.

Several officials who attended the meeting told Agamir Somoy on Saturday that Bangladesh Bank had made an initial decision to liquidate Padma Bank as it was unable to repay depositors’ money and was burdened with huge classified loans and a liquidity crisis.

Before that, changes had been made to the bank’s board of directors to improve its situation. However, the crisis did not ease. The bank failed to make any improvement in liquidity management. The management also could not present any specific action plan for recovery. The bank only sought Tk 5,000 crore in assistance which Bangladesh Bank rejected. In this situation, the initial decision was made to liquidate the bank rather than allow it to continue in its previous condition.

A Bangladesh Bank deputy governor who spoke on condition of anonymity said Padma Bank is a “cancerous growth.” How much longer can its liabilities be carried? Considering everything, the bank will not be allowed to continue in its current condition. Closing it has become essential. No bank is willing to merge with Padma. Earlier, attempts had been made to merge the bank with EXIM Bank and Sonali Bank but those efforts failed.

According to Bangladesh Bank data, Padma Bank’s assets stand at around Tk 7,000 crore. As of June, its classified loans stood at Tk 5,538 crore. Of that amount, Tk 4,933 crore had become classified which accounts for 90 percent. In June 2026, the previous year, classified loans stood at Tk 5,131 crore which accounted for around 91.66 percent of total loans. The bank has recovered some money mainly through loan rescheduling and exit programs. The amount of classified loans has also declined slightly.

A review of the bank’s information shows that Padma Bank had assets worth around Tk 6,347 crore in June. A large portion of the assets belongs to various state-owned institutions. Around Tk 3,000 crore belonging to 43 government institutions and agencies is stuck with Padma Bank. These include Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, Investment Corporation of Bangladesh (ICB), Jiban Bima Corporation, Sadharan Bima Corporation, Bangladesh Power Development Board, Titas Gas, Bangladesh Telecommunication Regulatory Commission (BTRC), Mongla Port and Chattogram Port.

In addition, around Tk 760 crore belonging to the Climate Change Trust Fund and related trusts has been deposited with Padma Bank. The bank has been unable to return the money for years.

How Padma Bank came into being

According to Padma Bank, it currently has 60 branches, 14 sub branches and six agent outlets. The bank has around 1,600 employees.

However, just four years after starting operations in 2013, the then Farmers Bank collapsed due to irregularities and corruption. The bank was approved on political considerations under pressure from former Home Minister and leader of the now banned Awami League Mohiuddin Khan Alamgir. Bangladesh Bank stepped in to keep the bank afloat.

Bangladesh Bank restructured the bank’s board of directors, changed its name, provided capital and extended unprecedented policy support. None of these measures worked. Instead, the bank incurred losses of more than Tk 6,000 crore which exceeded its total assets.

To conceal its reputation problems, The Farmers Bank was renamed Padma Bank on January 29, 2019. However, those concerned believe that the initial attempt to keep the bank afloat was a mistake. According to them, if the bank had been liquidated or forcibly merged with another bank at that time, the costs for Bangladesh Bank and the government would have been much lower.

Now, if the authorities move to liquidate the bank, the government will have to bear its huge accumulated losses and capital shortfall. This means the money will have to come from taxpayers. In 2019, state owned Sonali, Janata, Agrani and Rupali banks and state-owned investment agency ICB jointly provided Tk 715 crore in fresh capital to Padma Bank. The money was never repaid.

Md. Shawkat Ali Khan is the current chairman of Padma Bank by virtue of his position as managing director of state-owned Sonali Bank.

Regarding Padma Bank, he said, “There is hardly anything left of the bank. The deposits and capital are exhausted. The accumulated losses have now exceeded the amount of the bank’s assets and liabilities. Officials have little to do apart from recovering loans. Management was instructed long ago to reduce expenses but nothing was done. We invested in Padma Bank at the government’s direction. Now Bangladesh Bank and the government will have to decide what will happen to its future.”