The government will come up with a plan to recover the Tk 873cr climate fund from Padma Bank

The interim government will formulate a specific roadmap to recover Bangladesh Climate Change Trust (BCCT) funds worth Tk 873.82 crore held in Padma Bank since 2016.

To formulate the roadmap, high-level representatives from various ministries and departments, including the Finance Department, the Financial Institutions Department and the Ministry of Environment, Forest and Climate Change, will hold a meeting with Padma Bank officials at Bangladesh Bank today.

According to finance ministry sources, in addition to BCCT funds, the meeting will also determine plans to recover other government funds tied up in the ailing Padma Bank, whose board of directors was reconstituted following the change of political power on August 5.

In 2015, the BCCT, which operates under the Ministry of Environment, created a Fixed Deposit Receipt (FDR) account of Tk 536 crore, then known as Farmers Bank, for a period of one year.

The money was deposited at the bank’s Motijheel, Gulshan and Gulshan Avenue branches.

At maturity, the FDR was extended till 2018 as Padma Bank had managed to return only Tk 74 crore in different phases.

In September 2023, a BCCT official said the bank had made no further payments.

The principal and interest increased to Tk 597.62 crore at the end of the 2018-19 financial year.

By February this year, the amount due to the trust had risen to Tk 873.82 crore.

The wait to get the investment back became longer as Padma Bank was given another eight years by the Ministry of Environment to repay the money in December 2022.

Despite this, on December 31, 2023, BCCT officials sent a letter to the Governor of Bangladesh Bank and Secretary of the Financial Institutions Division seeking advice on possible legal action.

But no visible measures were taken to that effect at the time, BCCT officials added.

On January 21 this year, Padma Bank converted Tk 760.09 crore of the funds into eight-year preference shares of the bank at an interest rate of 6 percent without seeking the BCCT’s approval, trust officials said .

Just three years after its inception in 2013, Padma Bank was embroiled in a liquidity crisis due to significant irregularities.

Yet, due to political interference and the lure of high interest rates, government agencies such as the BCCT continued to invest significantly in the bank.

During a special investigation in 2015, the central bank revealed significant violations of banking regulations by the bank’s management during the loan disbursement process.

The central bank discovered the involvement of the bank’s former directors in sanctioning loans.

After the news hit the headlines, people rushed to withdraw their deposits, crippling the bank’s ability to carry out its daily operations.

In January 2019, Farmers Bank was rebranded as Padma Bank as the troubled lender sought to sweep gross irregularities and loan scams under the carpet and get an image makeover.

As of September 2018, loan defaults at the private commercial bank stood at Tk 3,071 crore, up from Tk 723 crore in 2017.

The issue of recovering the money owed to the BCCT arose again at an Advisory Council meeting on September 12.

During the meeting, it was decided to give priority to the issue of liquidating this money and to formulate a specific roadmap on a priority basis, after consultation with representatives of all parties involved, including the central bank.

Speaking to The Daily Star, Bangladesh Bank Managing Director Saiful Islam, who will chair today’s meeting, confirmed that the meeting is likely to take place as planned.

“During the meeting, we will hear from representatives of the BCCT and Padma Bank. We will then decide on the next course of action,” he added.

Md Rafiqul Islam, director of the BCCT, said they will look for ways to recover the money from the Bangladesh Bank.

“Apart from that, we will also urgently try to raise as much money as possible in the first instance.”