NBFI non-performing loans soar to Tk27,189cr in March 

Infographics: TBS

Non-performing loans (NPLs) in Bangladesh's non-bank financial institutions (NBFIs) surged to Tk27,189 crore by the end of March this year, accounting for 35.32% of the sector's total outstanding loans of Tk76,987 crore.

This marks a deterioration from December 2024, when NPLs stood at Tk25,089 crore or 33.25% of the total Tk75,450 crore in outstanding loans.

An analysis of the data shows that although loan outstanding in the fragile NBFI sector has been rising recently, the volume of classified loans is increasing even faster – indicating that not only previously disbursed loans, but also newly disbursed loans are likely entering the classified loan category.

Compared to the same period last year, NBFI loan outstandings rose by Tk2,598 crore, while default loans surged by Tk3,300 crore. As a result, the NPL ratio jumped by 3.32 percentage points year-on-year.

Even during the January-March quarter of FY25, the trend remained consistent. The sector's outstanding loans grew by Tk1,537 crore since December 2024, whereas classified loans rose by Tk2,100 crore.

"The real pressure is from older loans turning bad. Many of the previously overdue loans are now being gradually added to the classified loan category, leading to increase in NPLs." – Golam Sarwar Bhuiyan, former MD of IIDFC

However, Golam Sarwar Bhuiyan, former managing director of Industrial and Infrastructure Development Finance Company (IIDFC) said as fresh loans are hardly being disbursed, the chances of a sharp rise in classified loans from new disbursements are low.

Speaking to The Business Standard on the issue, he said, "The real pressure is from older loans turning bad. Many of the previously overdue loans are now being gradually added to the classified loan category, leading to increase in NPLs."

Talking to the TBS regarding the situation, a managing director at a financial institution, who wished to be unnamed, said, "The reputation of several institutions has been tarnished by various irregularities, making it difficult for them to attract deposits. As a result, new loan disbursements have decreased, and existing loans, which have been rescheduled for extended periods, are now becoming defaults."

The situation is particularly alarming in several institutions. As of September 2024, 19 out of 35 NBFIs reported NPL ratios exceeding 50%, Bangladesh Bank data show.

According to Bangladesh Bank's Financial Stability Assessment Report for 2024 September quarter, NBFI's showed a worsening trend in their performance due to further decline in asset quality and profitability. 

Total assets and profitability of NBFI's demonstrated a downswing compared to the April-June 2024 quarter. Total assets of the institutions decreased to Tk99,493 crore, rendering 1.22% reduction from the previous quarter. 

The annualized return on assets (ROA) decreased to negative 3.02% in the review quarter, down from negative 2.44% in the previous quarter. 

Commenting on the ongoing liquidity crisis in the NBFI sector, Golam Sarwar said, "Fresh deposits are not coming in as they used to. On top of that, many NBFIs have failed to repay their loans from banks on time, which has made banks reluctant to provide the same level of liquidity support as before."

"As a result, the ongoing liquidity crisis remains unresolved," he added.