How Padma Bank turned insolvent

Padma Bank, formerly Farmers Bank, slid into long-term insolvency after large-scale lending irregularities, failed state bailouts and continued governance failures, leaving it unable to recover defaulted loans or restore capital.

How it happened:

• The bank began facing severe financial stress soon after its establishment in 2013 because of large-scale lending anomalies.
• By 2018, the situation had worsened to the point where four state-owned banks and the Investment Corporation of Bangladesh injected Tk715 crore as a bailout.
• State-owned banks later provided a further Tk1,000 crore through subordinate bonds and fixed deposits.
• Despite these public investments, the bank failed to recover money from defaulters, allowing capital erosion to continue.
• Governance problems persisted even after the board was reconstituted under the bailout package.

90% default loans, insolvent for years – Padma Bank merger still not in sight

• Chowdhury Nafeez Sarafat was appointed chairman in January 2018 after former chairman Muhiuddin Khan Alamgir resigned amid allegations of financial scams.
• Sarafat allegedly siphoned money from the bank to his firm, Bangladesh RACE Asset Management, further weakening the bank's financial position.
• Like his predecessor, Sarafat later resigned after failing to restore the bank's financial health.
• Neither Sarafat nor Alamgir has faced legal action over the alleged financial plundering.
• By June 2025, Tk5,131 crore of the bank's Tk5,598 crore in loans had turned non-performing, accounting for more than 91% of total loans.
• The bank recorded negative shareholder equity of Tk4,533 crore, meaning its liabilities exceeded its assets.
• Continued operating losses further deepened the bank's insolvency.
• The bank also accumulated Tk683 crore in dues to Bangladesh Bank, including penalties and shortfalls in maintaining mandatory cash and liquidity reserves.