ICB initiates legal battle to recover Tk920cr stuck FDRs in Padma Bank, 10 NBFIs

Facing bleak recovery prospects, the state-owned Investment Corporation of Bangladesh (ICB) has decided to initiate legal action against Padma Bank and 10 non-bank financial institutions to recover Tk920 crore locked in unpaid fixed deposit receipts (FDRs).

ICB, an investment bank mandated to support the capital market, had invested heavily in FDRs with the NBFIs and Padma Bank five to six years ago, seeking higher returns amid elevated interest rates. However, the investments have since turned sour as the institutions plunged into liquidity crises and defaulted on repayments, pushing ICB into deep financial distress.

Infographics: TBS

Burden of bad investments

These non-performing FDR investments have now become a major burden for ICB, plunging the corporation deep into the red and resulting in its highest-ever loss in the last fiscal year due to mandatory provisions for bad investments.

Troubled Padma Bank and other NBFIs have been defaulting on the repayment of the FDRs despite repeated urges from ICB as they are also grappling with massive classified loans and liquidity crises.

A board member of ICB, seeking anonymity, told TBS, "In the last board meeting, we decided to initiate legal proceedings; in line with this, we decided to send legal notices to institutions."

This caution comes after the ICB absorbed a bitter experience, sustaining approximately Tk140 crore in losses from the merger of five banks after the Bangladesh Bank reduced their paid-up capital to zero, wiping out shareholder value. The possibility of merging weak NBFIs is also under discussion, causing the share prices of some listed NBFIs to fall below Tk1 per share.

Earlier, in its recovery efforts, the ICB sought intervention from the central bank, the regulator of banks and NBFIs. Last year, the state-owned institution also formed a special team and deployed additional staff to monitor and recover long-overdue FDRs.

Kazi Md Talha, chief executive officer of Padma Bank, which holds Tk154.02 crore in FDRs from ICB, told The Business Standard, "Due to a liquidity crisis, we are unable to repay large amounts owed to clients. At most, we are only able to pay clients between Tk5,000 and Tk30,000."

He added, "Every month, we receive letters from the ICB seeking repayment, but we cannot pay due to the liquidity crisis."

A managing director of an NBFI, speaking on condition of anonymity, said, "We are helpless. Nothing exists in the institutions as huge funds were provided without proper documentation or collateral. We cannot recover the loans given to businesses – how can we repay the lenders?"

He added, "We, the existing management, are trying to recover the loans, but no one is paying heed to us."

ICB eyes legal actions

As the earlier measures failed to yield results, ICB has now moved to initiate legal proceedings against Padma Bank and the NBFIs. 

In line with the legal proceedings, in the last board of directors' meeting held earlier in December, it was decided to serve legal notice to the institutions, which are failing to repay the FDRs to ICB. 

An official of ICB's legal wing confirmed that they have already served legal notices to Padma Bank and the NBFIs.

The biggest defaulter

According to available data, International Leasing and Financial Services, which has been struggling with a high volume of classified loans, holds the highest amount of ICB's FDRs, totalling Tk191 crore.

According to its auditors' report, as of 31 December 2024, International Leasing's retained earnings stood at a negative Tk4,976.93 crore, while it posted a net loss of Tk865.34 crore in 2024 due to income reversals and provisions made against subsidiary loans and advances.

The company's liabilities increased by Tk895.52 crore as a result of unpaid expenses, accrued interest, and the said provisions to address the adverse financial situation.

Additionally, leases, loans, and advances stood at Tk4,139.33 crore as of 31 December 2024, of which Tk4,045 crore – representing 97.72% – were classified.

How FDRs hit ICB

Over the years, the FDRs remained due from the NBFIs and Padma Bank amid financial crisis in these institutions, but ICB showed the outstanding as receivable and could not keep provisioning against the funds.

The existing board of ICB, mostly reconstituted after the political changeover, decided to maintain provisioning against the non-recovery investment.

In FY25, ICB maintained a total provision of Tk791.26 crore. Of this amount, Tk586.41 crore was kept aside for other assets (mainly the defaulting FDRs), which became the key contributor to the Tk1,213.86 crore loss. In the previous fiscal year, ICB had reported a profit of Tk32.68 crore.