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Of the total amount, about Tk 89 crore pertains to SLR shortfall and Tk 55 crore to CRR shortfall
Padma Bank, formerly known as Farmers Bank, has requested the Bangladesh Bank to waive the interest amounting to Tk 144 crore on the fines levied for failure to maintain the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) in 2017 and 2018.
CRR is the share of a bank’s total deposit that must be maintained with the BB in the form of liquid cash, while SLR is the minimum percentage of deposits that a bank has to maintain in form of gold, cash or other approved securities.
The CRR then was 5.5 per cent and SLR 13 per cent.
Failure to maintain the CRR elicits a fine of 5 per cent per day on the deficit amount. In case of SLR, the penalty is 7.75 per cent (current special repo rate) on the deficit, as per BB’s rules.
Owing to an extreme liquidity crisis, Padma Bank, then Farmers Bank, was unable to maintain the two, said a high official of the central bank seeking anonymity.
Subsequently, the BB imposed fines, which the bank failed to pay as well, he said.
The fine alone with the interest now stands at Tk 144 crore.
Of the total amount, about Tk 89 crore pertains to SLR shortfall and Tk 55 crore to CRR shortfall, said the BB official.
On November 4 last year, Padma Bank applied to the BB to pardon the entire amount. At a board meeting in January this year, it was decided that the bank would be given five years to clear the amount.
But the bank seems reluctant to pay the amount at all and has applied for a waiver once again.
The issue was discussed at the board meeting on Monday.
The BB board of directors is yet to take a call on the matter, preferring instead to forward the matter to the finance ministry.
“The issue has been taken to the board meeting but is yet to be approved as only the government has the sole authority to approve such matters,” said Md. Serajul Islam, spokesperson of the BB.
Contacted, Md. Ehsan Khasru, managing director and chief executive officer of Padma Bank, said: “We are not responsible for the large sum of fines imposed when the Farmers Bank was involved in various problems, including liquidity crisis.”
“We are now Padma Bank. The bank has changed a lot.”
For instance, the government is now a shareholder of the bank by way of five state-run financial institutions, he said.
“The huge amount of fines and the accompanying interest should be waived as it is an obstacle for us in moving forward,” Khasru added.
With the view to sweeping the gross irregularities and loan scams under the carpet and getting an image makeover, Farmers Bank was renamed Padma Bank in February last year.
The bank, which was established in 2013, became a hotbed for financial irregularities in less than three years of operation. More than Tk 3,500 crore was siphoned out from the bank, according to the BB.
Allegations of corruption against Muhiuddin Khan Alamgir and Md Mahabubul Haque Chisty, the then board chairman and chairman of the audit committee respectively, became deafening and depositors, which included government agencies, started pulling out money.
The two were forced to resign in November 2017, and the government stepped in to rescue the bank in 2018.
The state-owned financial institution Investment Corporation of Bangladesh, Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank bought 60 per cent stakes in the bank for Tk 715 crore.
At the end of September this year, the bank’s default loans stood at Tk 3631.7 crore, which is 64.7 per cent of its total disbursed loans.
It also has a capital shortfall of Tk 249.6 crore, according to the central bank’s latest data.
(DT)
