Govt to consider Padma Bank merger with state lender after an amendment to the law

The government will consider the merger of troubled Padma Bank with a state-owned bank after bringing necessary changes to the Bank Company Act.

Finance Minister AHM Mustafa Kamal said on Wednesday the government had drafted the amendment on necessary mergers and it was awaiting passage by parliament.

“The merger process will kick off after the approval [of the amendment],” he said after a meeting of the cabinet committees on economic affairs and government purchase.   

Section 77 of the Bank Company Act allows the merger of banks or financial institutions, but it does not stipulate the unification of weak lenders. As the banking sector is struggling with troubled lenders, such as Padma Bank, the government has moved to make changes to the law for their merger.      

The government approved The Farmers Bank, owned by Muhiuddin Khan Alamgir, an Awami League Presidium member, in 2013. He resigned as chairman following pressure over loan scams and irregularities in 2017.

Chowdhury Nafeez Sarafat, the chairman of RACE Asset Management Ltd who also heads the board of trustees of the Canadian University of Bangladesh, took over as chairman of the bank in early 2018 before it was rechristened Padma Bank the following year apparently to restore its image.

State-owned Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, and the Investment Corporation of Bangladesh injected into the troubled private bank Tk 7.15 billion, or 66 percent of its capital, at that time in a move to prevent it from going bankrupt.

Struggling to continue operations having been paralysed by a liquidity crisis, the bank now seeks more funds, or a merger with or acquisition by a state-owned bank.

The finance minister said they were yet to receive the Padma Bank plea for merger, but aware of the issue.   

“All our state-owned banks are linked to the ownership of Padma Bank. Sonali Bank, Rupali Bank, Agrani Bank and Janata Bank hold shares of Padma Bank, and this is how the bank is being run. So, we can obviously consider their proposal. But the law is needed first. We will consider the plea after the law is passed.”     

He said the government has not yet found out where the corruption took place in Padma Bank. Some people are in jail in an investigation based on primary evidence. “What else the government can do?”

“Now we must look after the interests of the shareholders, borrowers and depositors of the bank. So, the state-owned banks have come forward to keep the private lender operational.”

Kamal again faced questions about the approval of a proposal to build a 50-megawatt solar power plant project in Khulna’s Terokhada. The joint venture that has been awarded the job includes a company listed in Panama, the offshore tax haven. 

“Panama Papers and Panama are not the same,” the minister said, referring to the leaked confidential documents that revealed how the rich and powerful use tax havens to hide their wealth.

“The government does not have any investment in the project. We will buy power from the plant in line with the deal. The joint venture will make the entire investment.”