Padma Bank waived from maintaining mandatory SLR for 26 months

The central bank has waived Padma Bank from maintaining the stipulated statutory liquidity ratio (SLR) for 26 months starting from October 31, 2017.

In a circular, the department of off-site supervision of Bangladesh Bank said it has one this in line with the Section 33 of the Banking Companies Act 1991.

According to the banking laws, a bank must have to keep 12 percent of its demand and time liabilities (deposits) as SLR. The fund is kept with respective bank’s accounts with the central bank and banks can invest SLR funds in treasury bills and bonds.

Earlier in November 2019, Padma Bank applied to the BB for waiving Tk144 crore charged for failure to maintain CRR (cash reserve ratio) and SLR for a period between October 31, 2017 and December 31, 2019.

“The waiver the Bangladesh Bank has given to us was the era of the Farmers’ Bank. We have saved the bank from a probable liquidation,” Md Ehsan Khasru, managing director and CEO of Padma Bank, told the Business Insider Bangladesh.

“There has been no problem since we took over the bank,” he commented.

Due to the unabated loan scams, the Farmers’ Bank since its inception in 2013 had been in deep trouble. Finally, the government and the central bank stepped in to save the bank from being collapsed.

The government took four state-owned commercial banks — Sonali, Janata, Agrani and Rupali — and Investment Corporation of Bangladesh into the board of the renamed bank by giving them 68 percent stakes.

After being renamed as Padma Bank it started operations on January 29, 2019. But the BB waived Padma from keeping required SLR till December 31, 2019, meaning that out of the 26-month SLR waiver, 11 months were under the Padma Bank regime.

A senior official of the BB said under the Banking Companies Act 1991, the central bank can waive a bank from keeping adequate SLR. For example, he said Probashi Kallyan Bank in November 2019 was waived from maintaining the SLR.