State-owned and publicly listed Padma Oil Company has come under “high credit risk” after Tk 193 crore of its fixed deposits (FDRs) became trapped in five banks suffering from severe liquidity crises.

The troubled banks are Global Islami Bank, Union Bank, First Security Islami Bank, Social Islami Bank, and National Bank. Of these, the first four are currently undergoing a merger process, while National Bank continues to incur losses due to high volumes of defaulted loans.

According to the company’s auditors, whose report was published on Thursday , Padma Oil has already requested encashment of these investments, but the banks failed to respond positively due to acute liquidity shortages.

The audit firms—M.M. Rahman & Co. and Mahmud Sabuj & Co.—recommended that Padma Oil should consider recognizing the amount as a credit loss, given the heightened risk. Despite raising concerns, the auditors noted that the financial statements comply with international accounting standards and reflect a fair view of the company’s position as of June this year.

Financial sector analysts say the issue exposes Padma Oil’s weak corporate governance and its failure to assess early warning signs. They argue that the management should have evaluated the risks long before the banks encountered distress.

As of June, Padma Oil was entitled to Tk 22.3 crore in interest income from its investments, of which it managed to collect over Tk 17.3 crore, including advance income tax and excise duty.

Economist Mr. Alam warned that the blocked funds or potential counterparty credit losses may tighten the company’s liquidity position. He added that future incomes from bank deposits might also shrink.

Recently, the Bangladesh Bank initiated the merger of five distressed Islamic banks Global Islami, Union, FSIBL, Social Islami, and EXIM Bank into a new entity named “Combined Islami Bank.”

During the fiscal year ending in June, Padma Oil held FDRs worth Tk 1,986 crore across 23 commercial banks. Among these, Tk 79.5 crore is stuck with Global Islami Bank, Tk 55.9 crore with Union Bank, Tk 35.6 crore with FSIBL, Tk 16 crore with Social Islami Bank, and Tk 6.048 crore with National Bank.

Despite challenges, Padma Oil and other state-owned fuel marketing companies have maintained strong profit growth amid adverse business conditions, largely due to sharp increases in non-operating income fueled by rising interest rates on deposits.

Driven by strong petroleum product sales and robust non-operating earnings, Padma Oil posted a record annual profit of Tk 563 crore in FY25, marking a 38% year-on-year rise. Non-operating income surged 55% to Tk 608 crore, while operating income grew 10% to Tk 68.6 crore.

Following the record profit, the company declared its highest-ever 160% cash dividend for FY25, up from 140% the previous year. Shareholders will receive Tk 16 per share, and Padma Oil will spend Tk 157 crore from its annual profit to pay cash dividends.

However, analysts caution that high non-operating profits were possible because the company retained a large portion of its earnings instead of distributing them. If the stuck deposits eventually turn into losses, investors may feel deprived of returns that could have otherwise been distributed from accumulated profits.