Crisis-hit Padma Bank has sought a Tk 35 billion bailout from the Bangladesh Bank (BB) to sustain operations, but the central bank is considering either merging or liquidating the troubled lender amid deep financial distress.

Officials said the Department of Offsite Supervision (DOS) has completed a diagnostic review of Padma Bank and will soon forward the findings to the Bank Resolution Department, a newly created unit overseeing bank mergers under the Bank Resolution Ordinance, 2025.

The department is already handling the ongoing merger process of five Shariah-based banks: First Security Islami, Social Islami, Union, Global Islami, and EXIM Bank.

A senior BB official, speaking anonymously, described any bailout for Padma Bank as “a waste of money,” citing the DOS’s report that declared the bank’s financial condition “critical across all indicators with no prospect of recovery.” The central bank has therefore decided in principle not to provide liquidity support.

According to the report, 92 percent of Padma Bank’s loans are non-performing. As of June 2025, total loans stood at Tk 55.98 billion, of which Tk 51.31 billion were classified as defaulted. The bank’s capital base is negative, interest income has turned negative, and liquidity shortages have left it unable to meet regular obligations, including staff salaries.

Padma Bank’s acting CEO, Kazi Md Talha, acknowledged the crisis, saying the bank “needs money to run operations” and expects a merger once the ongoing consolidation of Islamic banks concludes.

Originally launched as Farmers Bank in 2013, the lender has long been plagued by allegations of financial irregularities. Within three years of its inception, over Tk 35 billion was reportedly siphoned off.

Despite restructuring in 2017 following major scandals and leadership changes, the bank continues to struggle, now burdened with Tk 61 billion in unpaid deposits and mounting losses.

Bangladesh Bank has extended liquidity support to more than a dozen weak banks since the appointment of the current governor, though most have yet to repay the funds. Officials say Padma Bank’s worsening condition leaves few viable options beyond merger or closure.