Summary: 

The planned merger of Padma Bank and Exim Bank is expected to take 18 months to 2.5 years, according to central bank authorities. The banks must submit a formal application to the Bangladesh Bank, supporting documentation, and a copy of the merger plan. The merger will be approved if the central bank approves the plan. Exim Bank, listed on the stock market, requires approval from the Bangladesh Securities and Exchange Commission. The merger plan must also be presented and submitted to the High Court for the approval of High Court.

Context: 

Following the failure of Padma Bank to recover under the government’s Tk 1,700 crore rescue package, the bank is scheduled to merge with Exim Bank in the nation’s first voluntary merger action.  According to central bank authorities, the planned merger of the financially troubled Padma Bank with the Shariah-based Exim Bank is expected to take between 18 months and 2.5 years to complete. On March 18th, 2023 the initial step of the merger was completed when the two banks signed the letter of intent to merge. The banks will now need to send a formal application to the Bangladesh Bank along with supporting documentation and a copy of the merger plan. Details on the securities and their value must be given in the case of secured debts. It is also necessary to provide the property’s worth as well as the assets and liabilities of the two banks. There are also some legal obligations that are to be followed for getting final clearance according to Bangladesh Bank. Exim Bank is listed on the stock market, hence approval from the Bangladesh Securities and Exchange Commission is also required. The banks will jointly agree on the asset valuation, according to the current BB guideline. The BB will act as a mediator and assist in resolving the conflict if they are unable to come to an understanding. According to Bangladesh Bank authorities, if they cannot agree on how to value the assets and liabilities, the merger decision may be revoked. In addition, they will need to present the merger plan and submit an application to the High Court. The two banks’ merger will be finalized following the High Court’s permission, according to Bangladesh Bank officials. On March 18, Nazrul Islam Mazumder, the chairman of Exim Bank, declared that Exim Bank will immediately assume all of Padma Bank’s obligations. In 2018, four state-owned banks—Sonali, Janata, Agrani, and Rupali—as well as the Investment Corporation of Bangladesh provided a Tk715 crore bailout to Farmers Bank which was later renamed as Padma Bank, that was on the verge of failure due to significant lending irregularities since its founding in 2013. The state-owned banks also made additional investments in the bank totaling approximately Tk1,000 crore in other ways. By the end of 2023, Padma Bank had Tk5,740 crore in outstanding loans, of which Tk3,550 crore had fallen behind. As of June 2023, the percentage of default loans was close to 47%. Additionally, as of September 30, 2023, the bank reported a Tk607 crore capital deficiency. By the end of June 2023, the bank had more than Tk6,500 crore in total deposits. Primary data shows that liabilities of the bank was Tk5,000 crore higher from assets. With the provided bailout package, the government holds 65% stake in the bank. At present, state bank representatives are on the board of Padma Bank as investors. Nearly 950 employees are working at the bank. 

Picture and Article Source: The Dhaka Tribune & The Daily Star