BB draws the line: Five NBFIs to close, depositors to get up to Tk10 lakh
The decision was made at a board meeting held at the Bangladesh Bank head office yesterday (9 June), chaired by Governor Mostakur Rahman.
The Bangladesh Bank's Board of Directors has decided to appoint administrators at five non-bank financial institutions (NBFIs) as a step towards closing or winding them down following years of widespread irregularities and scandals during the tenure of the previous government.
The decision was made at a board meeting held at the Bangladesh Bank head office yesterday (9 June), chaired by Governor Mostakur Rahman.
According to meeting sources, discussions covered nine financially distressed institutions. For the five earmarked for closure or liquidation, boards will be dissolved and administrators appointed, similar to the process followed for merged banks. The remaining four have been given three months to recover.
Keep updated, follow The Business Standard's Google news channel
The five institutions marked for closure are FAS Finance, Far East Finance, Aviva Finance, Peoples Leasing and Financial Services, and International Leasing and Financial Services, according to Bangladesh Bank sources.
The four NBFIs given three months to recover are Bangladesh Industrial Finance Company (BIFC), Premier Leasing and Finance, GSP Finance, and Prime Finance.
A Bangladesh Bank official said the five institutions earmarked for closure hold deposits of approximately Tk2,700 crore from 27,000 individual depositors.
"Our first task is to dissolve the boards of these institutions. After that, administrators will be appointed in a similar process followed for the merged banks. Once administrators are in place, the process of returning depositors' funds will begin. Each individual depositor will receive up to Tk10 lakh."
He said only individual depositors at the five institutions will receive up to Tk10 lakh each, while corporate depositors will receive nothing for now but they will get back their funds only when non-performing loans of the institutions are recovered.
"Institutions are given a three-month timeframe to demonstrate the ability to repay individual depositors' principal within that period, or face the same resolution or liquidation process," he further added.
As of last December, non-performing loan rates stood at 99.99% for FAS Finance, 98.50% for Far East Finance, 93.93% for Aviva Finance, around 95% for Peoples Leasing, and 99.44% for International Leasing, according to a Bangladesh Bank report.
In May last year, Bangladesh Bank issued notices to 20 NBFIs asking why they should not be shut down due to high non-performing loans and failure to return deposits. Of these, nine institutions submitted recovery plans deemed unsatisfactory, prompting moves to close or wind them down. However, in January this year, three institutions were removed from the list, narrowing it to six. At that stage, GSP Finance, Prime Finance, and BIFC were excluded. More recently, the Bangladesh Bank board made a preliminary decision to close or wind up five institutions, dropping Premier Leasing from the list.
Sector insiders say the surge in non-performing loans at these institutions was largely driven by widespread irregularities and scandals during the tenure of the ousted Awami League government. As a case in point, PK Halder, former managing director of NRB Global Bank (later renamed Global Islami Bank), is accused of embezzling at least Tk3,500 crore from four NBFIs: Peoples Leasing, International Leasing, FAS Finance, and BIFC.
The broader NBFI sector has been grappling with severe liquidity shortages, high default loans, and weak governance for several years, prompting Bangladesh Bank to act under its resolution framework.
