Bangladesh Bank has moved to shut down nine non-bank financial institutions (NBFIs) after they failed to return depositors’ money, collapsed under massive non-performing loans, and suffered crippling capital shortfalls.
Currently, there are 35 NBFIs operating in the country, of which 22 are locally owned and 13 are joint ventures with foreign partners, according to BB report.
But many of them have been in deep trouble for years, forcing regulators to finally take drastic measures.
In May this year, the central bank issued show-cause notices to 20 NBFIs that were failing to operate properly, asking why their licences should not be revoked on grounds of high non-performing loans, capital shortfalls, and inability to return depositors’ money.
Eleven of these institutions submitted plans to turn around, but nine failed to provide satisfactory responses.
Bangladesh Bank has since decided to close them down and initiate liquidation.
The firms that will be shut are FAS Finance and Investment, Bangladesh Industrial Finance Company, Peoples Leasing and Financial Services, International Leasing and Financial Services, Aviva Finance, Premier Leasing and Finance, Fareast Finance and Investment, GSP Finance Company and Prime Finance and Investment.
Officials said a special fund of around TkÌý9,000 crore will be created to repay depositors once liquidation begins, with priority given to small savers.
Employees of these firms will receive dues according to service rules.
For years, depositors have suffered as their money remained stuck in these institutions.
Many retirees, small traders and families who had placed their life savings with these firms staged repeated protests in front of company offices demanding their money back.
Some depositors could not meet urgent medical expenses, pay for children’s education or manage retirement costs because their savings were locked away.
Together, the 20 struggling firms had Tk 25,808 crore in loans against collateral worth only TkÌý6,899 crore, of which TkÌý21,462 crore — or 83 per cent — were defaulted.
Their collateral coverage stood at just 26.7 per cent, far below acceptable levels.
Masrur Reaz, chairman of Policy Exchange Bangladesh told ¶¶Òõ¾«Æ· that the nine worst institutions were unavoidable.
He noted that most of these firms had become incapable of returning depositors’ money due to massive fund diversion and corruption.
He however, said that BB must ensure that the depositors can recover as much of their savings as possible during liquidation.
Despite the grim picture, a handful of NBFIs remain profitable, including IDLC Finance, IPDC Finance, LankaBangla Finance, DBH Finance, Infrastructure Development Company Limited (IDCOL), United Finance, and National Housing.
The non-bank financial institutions (NBFIs) sector in Bangladesh continues to struggle under the shadow of scams engineered by Prasanta Kumar (PK) Halder, whose fraudulent activities a decade ago set the entire industry on a downward spiral.
In 2014, PK Halder became managing director of an NBFI, who informally controlled four others under different names.
PK Halder, a close associate of controversial S Alam Group, siphoned off massive amounts of loans — directly and indirectly — mirroring the loan irregularities.
These abuses left several NBFIs crippled, as the contagion soon spread across the sector, creating a legacy of mismanagement and corruption that continues to this day.
Bangladesh Bank officials said the liquidation aims to bring relief to those depositors after years of uncertainty.
By the end of 2024, the NBFI sector’s combined losses stood at Tk 3,555 crore, almost double of the Tk 1,803 crore reported in 2023.
Bangladesh Bank’s Financial Stability Report 2024 painted a bleak picture, showing that only nine of the 35 NBFIs could be considered sound, while 21 were identified as weak.
The report noted that the sector’s capital adequacy ratio had fallen to just 1.62 per cent, far below the 10 per cent regulatory minimum.
Shareholders’ equity stood at negative Tk 9,716 crore at the end of 2024, highlighting the depth of the crisis.
Total non-performing loans and leases surged to TkÌý2,60,380 crore, with the sector recording a net after-tax loss of TkÌý3,555 crore, the report said.
Depositors bore the heaviest brunt of this collapse. As of December 2024, troubled NBFIs held TkÌý22,127 crore in deposits, including TkÌý5,760 crore from individuals.
While Bangladesh Bank has promised repayment of small deposits during liquidation, confidence in the entire sector has already been severely eroded.
Experts say the crisis reflects not just poor governance at individual NBFIs but also weak regulatory enforcement over the years.
Many loans were disbursed without proper assessment, often relying on collateral figures self-reported by the institutions rather than independently verified.
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NBFIs to be shut
- GSP Finance
- Prime Finance
- FAS Finance
- Peoples Leasing
- International Leasing
- Aviva Finance
- Premier Leasing
- Fareast Finance and
- Bangladesh Industrial Finance Company
