National Tea Company seeks cenbank help over Tk19cr unpaid funds from Padma Bank
Padma Bank PLC, a fourth-generation private bank that began operations in 2019 and was formerly known as Farmers Bank, has failed to return Tk19.28 crore deposited by buyers of the NTC shares
The National Tea Company, a quasi-government firm listed on the capital market and facing a financial crisis, is raising capital through a private placement share issuance to repay loans and expand its business.
However, Padma Bank PLC, a fourth-generation private bank that began operations in 2019 and was formerly known as Farmers Bank, has failed to return Tk19.28 crore deposited by buyers of the NTC shares.
The Bangladesh Securities and Exchange Commission (BSEC), the capital market regulator, has written to the Bangladesh Bank to take the necessary action to ensure the listed company gets its share subscription money back.
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The National Tea Company had requested BSEC's help after it failed to recover the funds despite repeated discussions and assurances.
In response to the company's letter, the BSEC acknowledged the matter of non-payment of the subscription money and stated, "The matter is placed before the Bangladesh Bank, as the prime regulator, for kind information and doing the needful."
Kazi Md Talha, CEO of Padma Bank, told TBS, "The bank is currently facing some issues. We returned a portion of the subscription money to the company and promised to pay the rest in phases, but we couldn't. We are still trying our best."
He mentioned that the bank is experiencing a liquidity crisis and is not receiving any support from the central bank. "As a result, the problems are persisting."
When asked how the share subscription money was spent, he explained, "The money for the share subscription was collected through various bank branches. Since there is a cash shortage, the branches have spent the money."
According to company officials, the first phase of the share allocation for capital raising was completed in September of last year.
Following the share subscription, the National Tea Company issued new shares to those who deposited money.
However, even though National Tea Company's paid-up capital and share count have increased after issuing the shares, the company has not received the money from the stock issuance.
Share issuance
During the share issuance, investors deposited Tk44.28 crore with Padma Bank. The bank subsequently paid Tk25 crore to the company via pay order, but has not provided the remaining Tk19.28 crore.
The National Tea Company is raising a total of Tk279 crore from its existing shareholders through this share issuance to pay off bank loans and increase its working capital.
The tea company plans to use a portion of the capital raised from investors to repay its debts, with the remainder being used as working capital.
The government holds a 51% ownership stake in the National Tea Company, while institutional and general investors own the rest of the shares.
BSEC's assistance sought
On 20 August, the National Tea Company wrote to the commission asking for help in recovering the outstanding Tk19.28 crore from Padma Bank, which was deposited for the company's private placement share subscription.
The letter stated that during the first phase of the share subscription, Tk44.28 crore (excluding commission charges) was deposited at Padma Bank's Gulshan corporate branch.
According to a decision made at a National Tea Company board meeting, the company decided to transfer the money to Pubali Bank. Although the National Tea Company sent a letter to Padma Bank requesting the transfer of the entire amount, the bank only returned Tk25 crore. Despite repeated reminders and requests, Padma Bank has not returned the remaining funds.
How Padma Bank is operating
According to several Padma Bank employees, the bank is facing an extreme liquidity crisis. It is not receiving new deposits and is unable to return money to existing depositors. The bank is currently focusing on recovering loans from customers who have defaulted.
An anonymous employee stated that everyone, from depositors to bank staff, is now dependent on loan recovery. When money is recovered from a borrower, it is distributed to customers and branch employees.
"When some loans are recovered, the money is distributed among the branches. That money is used to cover expenses and provide small amounts, like Tk2,000 or Tk5,000, to customers with urgent needs," the employee said.
He also mentioned that while the bank's poor condition is due to various irregularities, the biggest damage was done during the merger discussions with Exim Bank. "After the government change in August last year, deposits into the bank have completely stopped," he said.
The employee added, "After the merger decision was made, customers rushed to withdraw their money. Within a few days, small and large depositors withdrew crores of taka, which put the bank in a very bad situation. We are not getting any support from the central bank either. In this situation, it's not possible to return money to any investor, big or small."
Financials
Padma Bank's gross non-performing assets stood at a staggering Tk5,108.05 crore, representing 90.55% of its total loans and advances.
Its total disbursement was Tk5,641.42 crore, a significant amount was SME loans of Tk2,026.85 crore and Tk1,859.99 crore in trade service, according to a report, namely Risk-Based Capital Annual Disclosure for the year ended on 31 December 2024.
Its retained loss on the consolidated basis stood at Tk5,349.88 crore until 2024.
Tk2,000 crore in deposits from over 40 government institutions
Padma Bank holds deposits of approximately Tk2,000 crore from more than 40 government institutions.
According to a report published in the media, the Bangladesh Climate Change Trust has the largest deposit with Padma Bank, amounting to Tk899 crore. Additionally, approximately 43 other institutions, including the Investment Corporation of Bangladesh, General Insurance Corporation, Jiban Bima Corporation, Titas Gas, and the Bangladesh Power Development Board, also have deposits with the bank.
A recent meeting, chaired by Nazma Mobarek, secretary of the Financial Institutions Division of the finance ministry, was held to discuss the return of these government deposits. Padma Bank was instructed to provide a detailed, comprehensive roadmap for repayment.
