Your brake is certainly not properly set up. Do not ride the bike in this state!
The rotor's brake track must run fully between the brake pads. The radial dimension of both match.
Either you have a rotor that is too small for the brake it its present set up, your wheel is not properly inserted, or the brake caliper is not mounted correctly.
Check your brake's manual for adjusting it to different rotor sizes with adaptor plates. Often an adaptor can be flipped to accomodate 140 mm and 160 mm rotors.