NBFIs see over 17% accounts closed in one year
Industry insiders say customers’ trust in NBFIs wanes due to incidents of irregularities and corruption
The number of accounts of non-banking financial institutions (NBFIs) has declined by 90,338 or 17.32% in just one year.
The number came down to 431,221 in December 2023 from 521,559 a year earlier, as Bangladesh Bank data reveal.
Industry insiders say customers are gradually withdrawing from NBFIs as they have lost trust in them due to irregularities and corruption.
Md Golam Sarwar Bhuiyan, managing director of Industrial and Infrastructure Development Finance Company Limited, told TBS, "Many customers withdrew their deposits last year. This is because now there is more profit in bills and bonds. Therefore, everyone is leaning towards safe investments in bills and bonds."
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Consequently, even banks are facing liquidity problems along with other financial institutions, he said.
Nurul Amin, former chairman of the Association of Bankers Bangladesh, and independent director and chairman of FAS Finance, told TBS that customer confidence in the NBFI sector has declined in recent years due to several incidents of irregularities.
He also said like other sectors, the amount of defaulted loans has increased in the non-bank financial institutions too.
"The main reason for this is that financial institutions do not do any special work apart from the business that banks do. Besides, the monitoring system of financial institutions is weak, and due to a shortage of skilled workers, they may not be able to recover distributed loans for various reasons," Nurul Amin said.
According to Bangladesh Bank data, at the end of November 2023, the defaulted loan status of the NBFI sector amounted to Tk21,989 crore, which was 30% of the total disbursed loans.
Amid the crisis of confidence in the non-bank financial sector, many organisations are unable to find qualified management directors, said a senior official of an NBFI.
Twelve NBFIs are currently running without regular managing directors or chief executive officers. These are Bangladesh Industrial Finance Company, Union Capital, FAS Finance, UAE-Bangladesh Investment Company, GSP Finance Company (Bangladesh), Aviva Finance, Bay Leasing, First Finance, Phoenix Finance, Strategic Finance, IPDC Finance, and Agrani SME Finance.
