BB board clears path for NBFI liquidation, process begins in 2 weeks
9 troubled NBFIs initially selected for liquidation, which may cost the govt Tk9,000cr
The Bangladesh Bank is set to begin the initial phase of liquidating troubled non-bank financial institutions (NBFIs) within the next two weeks, focusing initially on at least nine such firms.
A senior official from the central bank's Department of Financial Institutions and Markets (DFIM) confirmed the matter to TBS.
The NBFIs under consideration include – People's Leasing and Financial Services Ltd, International Leasing & Financial Services Ltd, Aviva Finance Ltd, FAS Finance & Investment Ltd, Fareast Finance & Investment Ltd, Bangladesh Industrial Finance Company Ltd, Premier Leasing & Finance Ltd, GSP Finance Company (Bangladesh) Ltd and Prime Finance & Investment Limited.
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The move follows a Bangladesh Bank board meeting, chaired by Governor Ahsan H Mansur on Sunday, approving the liquidation of selected NBFIs.
A director of the Bank Resolution Department told TBS that the central bank's DFIM will finalise which institutions can be liquidated. At this preliminary stage, the division is working with a list of nine NBFIs struggling with irregularities, mismanagement, and financial losses.
A senior official at Bangladesh Bank said the Bank Resolution Ordinance 2025 allows for the liquidation of troubled NBFIs, but board approval is required to proceed.
Regarding the nine NBFIs, the official said that the managing directors and chairpersons of these institutions will be called in for discussions. Even after responses, liquidation may not occur if the central bank is satisfied with corrective measures.
"It is not yet final whether all nine institutions will be liquidated together or in smaller numbers," he said.
Asked about measures for depositors, the official said the government would provide funding support, but procedures have not been finalised. The approval at this stage allows the central bank to begin preliminary liquidation procedures.
Relevant officials at Bangladesh Bank said the government's preliminary expenditure for closing these institutions has been estimated at nearly Tk9,000 crore. Returning funds to small depositors will be given the highest priority.
Status of 9 NBFIs in question
Earlier, the Bangladesh Bank identified nine institutions as "unviable" based on three key indicators: inability to return depositors' funds, high non-performing loans (NPLs), and capital shortfalls.
A review by the Bangladesh Bank revealed that a large portion of loans in these nine NBFIs is non-performing. Among them, FAS Finance has 99.93% of its total loans classified as non-performing, with a cumulative loss of Tk1,719 crore. Fareast Finance has 98% non-performing loans and a loss of Tk1,017 crore, while Bangladesh Industrial Finance Company has 97.30% non-performing loans and a loss of Tk1,480 crore.
International Leasing & Financial Services has 96% non-performing loans with a loss of Tk4,219 crore. People's Leasing's non-performing loans stand at 95%, resulting in a loss of Tk4,628 crore.
Aviva Finance has 83% non-performing loans and a loss of Tk3,803 crore. Premier Leasing has 75% non-performing loans, amounting to a loss of Tk941 crore. GSP Finance's non-performing loans are 59%, with a loss of Tk339 crore, and Prime Finance has 78% non-performing loans and a loss of Tk351 crore.
According to Bangladesh Bank sources, under the Finance Companies Act 2023, the central bank has moved to cancel the licenses of these institutions. Section 7(1) of the law allows license cancellation for actions against depositors' interests, insufficient assets to cover liabilities, or failure to maintain required capital. Section 7(2) requires giving the institutions 15 days to show cause before cancellation.
Notices were issued to these companies on 22 May, and as satisfactory responses were not received within the stipulated period, the Bangladesh Bank finalised the decision to liquidate them.
Total 35 NBFIs: 20 troubled, 15 better
Currently, there are 35 NBFIs operating in Bangladesh. Of these, the central bank has identified 20 institutions as troubled. The total loan amount of these troubled institutions stands at Tk25,808 crore, of which Tk 21,462 crore (83.16%) is classified as non-performing. In contrast, the value of collateral assets for these loans is only Tk6,899 crore, or just 26% of the total loans.
On the other hand, the remaining 15 NBFIs, which are in relatively better condition, have a non-performing loan ratio of only 7.31%. They earned Tk1,465 crore in profit last year and have a capital surplus of Tk6,189 crore.
According to the Bangladesh Bank, total deposits in the NBFI sector currently amount to Tk48,966 crore, of which Tk22,127 crore belongs to the 20 troubled institutions. These institutions also owe other banks and financial institutions an additional Tk5,164 crore.
Among these troubled NBFIs, net individual customer deposits total approximately Tk4,971 crore. The Bangladesh Bank believes that during the initial phase of liquidation and restructuring, funds may need to be made available to cover these deposits. The central bank also stated that after liquidation, employees of the institutions will receive all benefits due under employment regulations.
