Almost three months after the merger proposal presented by Padma Bank, the Bangladesh Bank said the financial health of public lenders was now facing “several problems” due to the excessive delinquent loans.
In addition, the financial indicators of public banks suffer from a capital deficit.
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Banks are also suffering from weakness in other financial indicators, including operational and management issues.
In this context, the central bank said that attracting foreign capital would be a good option in order to solve Padma Bank’s lack of capital.
The BB made the remarks in a letter sent to the Ministry of Finance on October 5.
Earlier in September, Padma Bank signed a memorandum of understanding with California-based investment bank DelMorgan & Co to find potential foreign investors.
Padma Bank, formerly Farmers Bank, begged the finance ministry in July to merge it with a state bank in its desperate efforts to prevent further deterioration in its financial health.
In the letter, Padma Bank said she has faced many constraints since starting her new journey in 2019, including a severe lack of cash.
It said it has succeeded in improving its liquidity status over the next two years and building depositor confidence while continuing the process of regularizing defaulted loans in phases.
The bank’s operating losses amounted to Tk 120 crore in the first half of 2021, resulting from the economic slowdown induced by Covid-19.
The capital shortfall is estimated to be Tk 2,100 crore in June this year, the bank said in its letter to the finance ministry.
On September 29, Finance Minister AHM Mustafa Kamal said the government could allow Padma Bank to merge with a state bank.
“Of course we can do it,” Kamal said, answering reporters’ questions that day.