Bangladesh Bank yesterday granted a new waiver to Padma Bank allowing it to maintain a lower amount of liquid assets requirement to allow the troubled lender to improve its balance sheet and attract foreign investors.

The central bank had previously allowed the private commercial bank to maintain a statutory liquidity ratio (SLR) of 9.75%, apart from the cash reserve ratio (CRR), against its sight and term liabilities for 2022. and 13% for 2023.

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Now, Padma Bank could only keep 3.25% of liquid assets (treasury bills and bonds) as SLR with CRR from 2022 to 2024.

The SLR is a minimum percentage of deposits that banks must keep in the form of cash, gold or other securities, while the CRR determines the share of customer deposits that they must keep in reserve with the central bank. .

Padma Bank will have to increase its SLR to 6.5% in 2025 and 9.75% in 2026, according to a notification from the BB.

Under BB rules, banks must keep 4% of cash as CRR and 13% of cash equivalent assets as SLR.

The central bank has relaxed the rule for Padma Bank to allow the scammed bank to attract investors and prevent it from collapsing in 2020.

The new easing follows calls from Padma Bank, which had previously been bailed out by five state-owned financial institutions – Investment Corporation of Bangladesh, Sonali Bank, Janata Bank, Agrani Bank and Rupali Bank – following massive financial irregularities.

The five financial institutions injected Tk 715 crore into the bank to acquire 60% of its shares.

Established in 2013 as Farmers Bank, the lender had fallen prey to scammers. A Bangladesh Bank investigation revealed that more than Tk 3,500 crore was embezzled between 2013 and 2017.

Until January, the bank’s accumulated loss was around Tk 805 crore and the BB allowed it to adjust the amount over the next 10 years.

Padma Bank had previously asked the central bank to allow it to clean up its balance sheet so that it could attract 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 offered to mobilize foreign investment of $700 million for Padma Bank. However, the Bangladeshi lender should show that its balance sheet is transparent.

Padma Bank’s capital shortfall stood at Tk 540 crore in September 2021 and defaulted loans jumped to Tk 3,586 crore, accounting for 62.4% of its outstanding loans.

“We have received massive regulatory support from the central bank. This, together with other policy measures, will help us sustain and effect a gradual turnaround,” Tarek Reaz Khan, chief executive of Padma Bank, told the Daily Star. .

Due to the capital restructuring, the accumulated loss and the provision shortfall have been converted into intangible assets, helping the bank break even in 2021, he said.