Padma Bank, formerly Farmers Bank, has sunk into such a financial abyss that the lender is struggling to pay its employees' monthly salaries and has sought a Tk 5,000 crore bailout package from Bangladesh Bank to stay afloat.

Since August last year, the bank's 850-odd employees have been receiving their salaries in their accounts but they are not allowed to withdraw the full amount at once. They can take out the money in phases.

Additionally, incentives have been suspended for years and promotions have been halted since last year, The Daily Star has learnt from banks' officials who spoke on the condition of anonymity for fear of reprisal.

The bank spends about Tk 5-6 crore every month on salaries while it recovers around Tk 14-15 crore from borrowers, according to internal data.

From the recovered amount, the bank repays small depositors and covers employee salaries, Kazi Md Talha, acting chief executive officer of the bank, told The Daily Star last week.

To address its fund crunch, Padma sought a Tk 5,000 crore bailout from the BB in January. However, the central bank has yet to respond to the request.

"If we receive the funds, we can repay both individual and institutional depositors," he said.

Padma Bank, which was granted a licence in 2013 on political considerations, has struggled with financial irregularities since its inception. More than Tk 3,500 crore was siphoned out of the bank within just three years of its establishment.

As of September last year, the bank's defaulted loans stood at Tk 4,856 crore, which is 86 percent of its total disbursed loans, according to BB data.

Some of the major loan defaulters include Mass Shipping Recycling Industries (Tk 140 crore), Nahar Agro (Tk 60 crore), Apollo Engineering (Tk 80 crore), Mim Jute (Tk 60 crore), and East West Properties (Tk 60 crore), a concern of Bashundhara Group.

Additionally, the bank recently rescheduled Tk 83 crore in loans for Meghna Cement, another concern of Bashundhara Group, while Tk 23 crore of Beximco Group's loans defaulted in the December quarter.

For years, it has failed to return depositors' money. Its unpaid deposits amount to Tk 6,100 crore.

Padma owes significant amounts to several corporate depositors, including Tk 722 crore to the Bangladesh Climate Change Trust Fund, Tk 182 crore to the Chittagong Port Authority, Tk 153 crore to the Investment Corporation of Bangladesh (ICB), Tk 109 crore to Bangladesh Jiban Bima Corporation, Tk 68 crore to the Mongla Port Authority, Tk 58 crore to Titas Gas Transmission & Distribution and Tk 80 crore to Bangladesh Infrastructure Finance Fund.

The bank, which has been incurring losses since 2017, currently faces a current account deficit of Tk 235 crore with the central bank.

The bank's financial health took a turn for the worse after its inclusion in the Awami League-led government's plan in March last year to merge 10 weak banks with stronger institutions.

This triggered fresh panic among depositors, leading to increased withdrawals. Since then, approximately Tk 600 crore in deposits has been withdrawn from the bank.

After the fall of the Sheikh Hasina-led government in August last year, Padma's planned merger with Shariah-based EXIM Bank was aborted.

"Padma Bank was not as weak as some Shariah-based banks but its financial health worsened after the merger announcement by the government at that time," Talha said.

The merger uncertainty also led to an exodus of employees. Around 200 temporary officials, hired for loan recovery efforts, left the bank, and approximately 30 permanent employees resigned since the merger decision.

Bank officials admitted that they are struggling to recover the defaulted loans as many were issued through fraudulent means and irregularities.

The bank's financial troubles date back to 2015-16, when the central bank detected massive irregularities. In response, its ownership and management underwent significant restructuring in 2017, after Muhiuddin Khan Alamgir, a former presidium member of the Awami League, resigned as the chairman.

To rescue Farmers Bank from collapse, the government intervened with financial support.

State-owned institutions, including the ICB, Sonali, Janata, Agrani and Rupali Bank, collectively acquired a 60 percent stake for Tk 715 crore.

In January 2018, Chowdhury Nafeez Sarafat, chairman of RACE Asset Management, took over as the chairman of the bank, which was subsequently rebranded as Padma Bank in 2019 in an attempt to restore credibility. However, the institution remained plagued by its past scandals.

Sarafat stepped down from the post of chairman in January last year.