Govt to decide on how to recover Tk874cr climate funds from Padma Bank

The interim government, led by Chief Adviser Dr Muhammad Yunus, will explore ways to recover Tk874 crore climate funds – including both principal and accrued interest – withheld by Padma Bank.

The bank, formerly known as Farmers Bank, has not paid any interest on the fixed deposit receipts (FDRs) opened by the Bangladesh Climate Change Trust for the past six years, according to officials of the Trust.

On Tuesday (10 September), Rafiqul Islam, managing director of the Bangladesh Climate Change Trust which is operated under the Ministry of Forest, Environment, and Climate Change, told TBS that the issue will be discussed in the next Advisory Council meeting, which will decide on how to recover the funds from Padma Bank.

He said in 2015, FDRs totalling Tk508 crore were opened at the Gulshan, Motijheel, and Gulshan South Avenue branches of the then Farmers Bank for one year.

"Due to non-payment of interest, these FDRs were renewed until 2018. By then, Padma Bank had returned only Tk80 crore in phases and no further funds have been received since," he said.

Three years after its establishment in 2013, the bank encountered a liquidity crisis stemming from significant irregularities. 

Despite this, government entities like the Bangladesh Climate Change Trust Fund invested substantial sums in the bank, lured by high interest rates. A significant portion of these deposits remain unrecovered.

"Since 2018-19, we have repeatedly met with the bank officials and sent numerous letters requesting a refund, but the bank did not comply. It owes us Tk873.81 crore including principal and interest, and we want the full amount back," said Rafiqul Islam.

When asked how the funds would be recovered, he said, "The bank is in a poor condition but we must recover the money. The Advisory Council will determine the government's approach to collecting these funds."

An official from the Financial Institutions Division (FID), wishing not to be named, told TBS, "This situation is unprecedented. While irregularities and corruption have occurred in the financial sector, there has never been a discussion in the cabinet or advisory council about recovering government deposits from a bank."

Other govt institutions' funds stuck in Padma Bank

Despite substantial deposits from government institutions being withheld at Padma Bank for years, its former chairman Chowdhury Nafeez Sarafat used political influence to secure renewal facilities, disregarding repeated requests from customer institutions for refunds, according to FID officials.

Last week, the Chittagong Port Authority reached out to the Bangladesh Bank and the finance ministry for assistance in recovering its Tk179 crore held in Padma Bank.

The state-run Bangladesh Jiban Bima Corporation had deposited Tk109 crore in Padma Bank. By 2018, the amount increased to Tk125 crore with interest. 

The corporation sent 31 letters to Padma Bank, requesting deposit encashment. Ultimately, it was compelled by Padma Bank's proposal to renew the FDR until 2029 at a 6% interest rate.

Padma Bank proposed refunding Jiban Bima's FDR money in phases over seven years.

Titus Gas Transmission and Distribution Company, which had a Tk53 crore FDR with Padma Bank for the 2015-18 period, was also compelled to renew the deposit until 2029 under a step-by-step payment plan as proposed by the bank.

The Tk25 crore FDR of the Bangladesh Telecommunication Regulatory Commission is similarly stuck in Padma Bank.

Scam-hit Farmers Bank

Less than three years after its establishment, the then Farmers Bank faced criticism for financial irregularities. 

A Bangladesh Bank report revealed that between 2013 and 2017, over Tk3,500 crore was misappropriated from the bank, much of which remains in default.

Following these issues, former board chairman Muhiuddin Khan Alamgir and audit committee chairman Md Mahbubul Haque Chisti faced corruption allegations and were forced to resign in November 2017. 

The government attempted to revive the bank in 2018 by having Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, and the Investment Corporation of Bangladesh (ICB) purchase 60% of its shares with a Tk715 crore investment. 

However, these state-owned institutions have yet to receive any dividends due to the bank's continued financial losses. On the contrary, these investor banks and ICB are paying interest to the depositors against these funds.

In an exclusive interview with TBS, former finance minister Abul Maal Abdul Muhit admitted that it was a mistake to use state-owned bank funds to keep Farmers Bank afloat. He said that it was a political decision made by the government