Imagine a bank where a staggering 90% of its loans have defaulted, leaving it insolvent for years. This isn’t a hypothetical scenario—it’s the grim reality of Padma Bank, formerly known as Farmers Bank. But here’s where it gets controversial: despite its dire state, a merger with state-owned banks remains elusive, leaving depositors in limbo and taxpayers on the hook for billions. Could this be a case of systemic failure, or is there more to the story than meets the eye?
Padma Bank’s troubles run deep. With over 90% of its loans defaulted, the bank has been hemorrhaging money, causing immense suffering for depositors and inflicting heavy losses on state-owned banks that invested over Tk700 crore. In a last-ditch effort, the bank sought Tk3,500 crore in liquidity support from Bangladesh Bank in September 2025, but its financial health remains critically unstable. The bank’s negative equity of Tk4,533 crore as of June 2025 is a stark indicator of its balance-sheet insolvency—a situation so severe that even liquidating all assets wouldn’t cover its liabilities.
And this is the part most people miss: Padma Bank is essentially a government-controlled entity, with 68% of its shares held by four state-owned banks and the Investment Corporation of Bangladesh (ICB). Yet, despite multiple attempts since 2021, a merger has failed to materialize. This inaction has left state-owned banks like Sonali, Janata, Agrani, and Rupali—along with the ICB—struggling with non-performing investments that threaten their own stability.
Bangladesh Bank Governor Ahsan H. Mansur describes the situation as “extremely sensitive,” given the trapped deposits and the suffering of ordinary citizens. He highlights the astronomical cost of resolving such a crisis, estimating it could require between Tk5,000 crore and Tk10,000 crore. While Padma Bank has submitted a viability plan, Mansur remains skeptical, noting that banks with non-performing loans exceeding 70% rarely recover. Here’s the kicker: several other banks are in similar predicaments, effectively becoming de facto state-owned entities after government bailouts. Mansur suggests that merging them with state-owned banks could be a discreet solution, but the final decision lies with the government.
Sonali Bank Managing Director Md Shawkat Ali Khan, who also chairs Padma Bank, echoes the urgency. He points out that the bank is operationally paralyzed, unable to attract new deposits or repay existing ones, eroding customer trust and threatening the broader banking sector. The bank has resorted to paying salaries and rent from loan recoveries—a unsustainable practice. Khan emphasizes that the government must act swiftly, as investor banks are grappling with provisioning requirements for their non-performing investments in Padma Bank.
But here’s where it gets even more contentious: the root of Padma Bank’s insolvency lies in corruption and mismanagement. When Farmers Bank was on the brink of collapse in 2013 due to massive lending anomalies, a Tk715 crore bailout from state-owned banks and the ICB in 2018 failed to stem the tide. Worse, the reconstituted board under the bailout package continued corrupt practices, particularly during the tenure of former chairman Chowdhury Nafeez Sarafat. Sarafat, who replaced Muhiuddin Khan Alamgir after a Tk500 crore financial scam, allegedly siphoned funds to his asset management firm before resigning without facing legal consequences. Neither Sarafat nor Alamgir has been held accountable, raising questions about regulatory oversight and political complicity.
As of June 2025, Padma Bank’s total deposits stood at Tk6,347 crore, with loans of Tk5,598 crore—91.66% of which are non-performing. The bank also owes Tk683 crore to Bangladesh Bank, including penalties for failing to meet reserve requirements. Here’s the burning question: Why has the government allowed this crisis to fester, and what does it mean for the future of Bangladesh’s banking sector?
The situation at Padma Bank is not just a financial crisis—it’s a test of governance, accountability, and public trust. As discussions continue, one thing is clear: the stakes are too high for inaction. What do you think? Is a merger the right solution, or is there a better way forward? Share your thoughts in the comments below.
