Disapproving of a plea for merger of the problem-ridden Padma Bank with any state-owned bank as a remedy, the regulator rather prescribes its capital replenishment by bringing in funds from abroad.
Officials said the Bangladesh Bank gave its opinion last week in a letter after the Financial Institutions Division (FID) had forwarded Padma Bank's plea to the regulator late August.
The troubled bank in a letter in July had sought finance ministry's intervention to rescue it from the position by issuing preferential shares and additional subordinated bond for maintaining required capital adequacy.
Alternately, the authority had proposed to merge the bank with any of its partner banks like Sonali, Janata, Agrani, and Rupali or any other state-owned commercial bank.
The central bank in its opinion said the issuance of preferential share and additional subordinated bond for maintaining capital adequacy is not consistent with the Bank Company Act 1991.
About the other proposal the regulator said there is a scope for merger of banks under section 77 (16) of the Bank Company Act 1991. But, in this case, there should be a prospect that depositors, creditors, and shareholders of the two parties should be benefited from the merger.
The central bank further noted that state-owned banks themselves are overwhelmed with high non-performing loans and capital shortages, and facing various operational and managerial problems.
The BB said before sending a letter to the FID that the Padma Bank on June 15 this year sought permission of the regulator for obtaining funds from abroad with the assistance of DelMorgan & Co.
After examining the application, the central bank in August gave the bank permission to acquire capital by raising foreign investments.
Former banker Kazi Mahmood Sattar also supported the central bank's suggestion in the case of Padma Bank's prayer
He said had the position of state-owned banks been well, the government might have meantime merged the BASIC bank with others for its rescue.
And "bringing foreign funds only may not help rescue the bank at all," Mr Sattar views about the predicament of the sinking Padma.
"Apart from arranging adequate capital, a good operator will also be needed to salvage it," he says about a way out.
