Published: 11:33 PM, 04 October 2026
BB Reaches Initial Decision to Liquidate Padma Bank
Padma Bank PLC (formerly Farmers Bank) has been limping along for the past 10 years. The bank has been struggling with a liquidity crisis since that time. Despite various measures taken year after year, there has been no improvement. Instead, the sponsors have taken loans extensively in their own names and through proxy entities. Minimum rules and regulations were ignored, and the bank was subjected to outright looting.
Seven years ago, the bank was renamed Padma in an attempt to rescue it from such a vulnerable situation. 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 about any positive change. The money was once again almost entirely siphoned off through irregularities and corruption. As a result, the bank's defaulted loans have risen to more than 90 percent, while its overall operations have come to a standstill.
Against this backdrop, the central bank has taken a preliminary decision to close down (liquidate) the bank.
Sources at Padma Bank and Bangladesh Bank (BB) said the bank's board of directors held a meeting with Bangladesh Bank last Thursday. The overall situation was discussed at the meeting, but no solution could be found to make the bank operationally viable. Bangladesh Bank then made a preliminary decision to liquidate Padma Bank to resolve its crisis.
The decision will be placed before the Bangladesh Bank board of directors for approval this month. If approved, the process of closing the bank will begin through the banking resolution mechanism. If such a decision is implemented, it would be the first bank liquidation in the country's history. Under existing provisions, an affected depositor of the bank would receive a maximum of Tk 2 lakh under the deposit insurance law.
Bangladesh Bank spokesperson and Executive Director Arif Hossain Khan told The Asian Age 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 substantial that overcoming them through normal procedures is impossible. In the current circumstances, keeping Padma Bank afloat or merging it with another bank would be extremely difficult. Considering everything, there is no alternative to winding it up through liquidation.
Several officials present at the meeting told reporters on Saturday, on condition of anonymity, that Bangladesh Bank had taken a preliminary decision to liquidate Padma Bank, which is unable to repay depositors, burdened with massive defaulted loans and suffering from a severe liquidity crisis.
Before this, changes had been made to the bank's board of directors in an attempt to improve its condition. However, the crisis did not ease. The bank failed to make any improvement in liquidity management and could not present any specific action plan for recovery. The bank merely sought Tk 5,000 crore in financial assistance, which Bangladesh Bank rejected. In this situation, a preliminary decision was taken to liquidate the bank rather than allow it to continue in its current state.
A Bangladesh Bank deputy governor, speaking on condition of anonymity, described Padma Bank as a "festering sore." He questioned how much longer its burden could be carried. Considering all aspects, the bank would not be allowed to continue in its current form, and closing it had become essential. No bank was 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 are worth around Tk 7,000 crore, while its defaulted loans stood at Tk 5,538 crore as of June. Of this, Tk 4,933 crore was classified as defaulted, accounting for 90 percent of the loans. In June of the previous year (2026), defaulted loans stood at Tk 5,131 crore, or around 91.66 percent of total loans. The bank managed to recover some money mainly through loan rescheduling and exit schemes. At the same time, the amount of defaulted loans declined slightly.
An analysis of the bank's information shows that Padma Bank had assets worth approximately Tk 6,347 crore in June. A significant portion of these assets belongs to various state-owned organizations. 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, 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, which the bank has been unable to return for years.
