Bangladesh Bank last week provided a fresh waiver to Padma Bank, allowing it to maintain a lower amount of mandatory liquid assets to enable the lender to improve its balance sheet and attract investors.
The central bank earlier permitted the private commercial bank to maintain a 9.75% statutory liquidity ratio (SLR), apart from the cash reserve ratio (CRR), against its demand and time liabilities for 2022 and 13% for 2023.
Now, Padma Bank would be able to keep only 3.25% of liquid assets (treasury bills and bonds) as SLR along with CRR from 2022 to 2024.
The SLR is a minimum percentage of deposits that banks have to maintain in the form of liquid cash, gold or other securities, while the CRR determines the portion of customer deposits that they must keep as a reserve with the central bank.
Padma Bank will have to raise its SLR to 6.5% in 2025 and to 9.75% in 2026, according to a central bank notification.
As per central bank rules, banks have to maintain 4% of cash as CRR and 13% of cash equivalent assets as SLR.
The central bank relaxed the rule for Padma Bank to enable the scam-hit bank to attract investors and prevent it from collapsing in 2020.
The fresh relaxation comes following pleas from Padma Bank, which was earlier rescued by five state-run financial institutions -- Investment Corporation of Bangladesh, Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank -- in the wake of massive financial irregularities.
The five financial institutions injected Tk715 crore into the bank to acquire 60% of its stakes.
A Bangladesh Bank investigation found that more than Tk3,500 crore was siphoned off from the bank, formerly known as Farmers Bank, between 2013 and 2017.
Until January, the accumulated loss of the bank stood at around Tk805 crore and Bangladesh Bank allowed it to adjust the amount within the next 10 years.
Padma Bank had earlier requested the central bank to allow it to clean its balance sheet so that it could draw foreign investors.
The lender signed a memorandum of understanding with DelMorgan & Co, a US-based investment bank, in September 2021, to secure foreign investments.
The investment bank had proposed to mobilize foreign investments of $700 million for Padma Bank.
However, the Bangladeshi lender would have to show its balance sheet as transparent.
Padma Bank's capital shortfall stood at Tk 540 crore as of September 2021 and default loans surged to Tk 3,586 crore, which accounted for 62.4% of its outstanding loans.
