Financial corporations other than banks have increased their investment in government securities in the April鈥揓une 2025 quarter while cutting back sharply on lending to businesses, a shift that signals caution in the non-bank financial sector.
The latest Bangladesh Bank data shows that these institutions raised their holdings of government bills and bonds by more than 42 per cent from a year earlier, one of the fastest increases in recent years.
These institutions, known as OFCs, include insurance companies, leasing firms, merchant banks, brokerage houses, mutual funds and asset-management companies.
They collect money from policyholders, investors and businesses and then lend or invest it across different markets.
Several factors appear to have driven the move toward government securities.
The investment environment has been uncertain, returns on treasury instruments have become more attractive and government securities are easier to sell quickly when cash is needed.
These instruments are essentially loans to the government, considered safe, but large exposure creates its own risks.
聽If borrowing costs rise or bond prices fall, institutions holding large amounts can face immediate losses.
The surge in government lending suggests OFCs preferred safer assets rather than lending more to the private sector.
This trend is also reflected in a major fall in trade credit and advances, which dropped by more than one-third to about Tk 3,525 crore.
Trade credit is a type of short-term loan that businesses rely on for everyday needs, including buying supplies or managing imports.
When these loans shrink, it often means financial institutions expect higher repayment risks or are facing liquidity pressure themselves.
The decline directly affects firms, especially small and medium enterprises, by slowing business activity and creating tighter cash conditions at a time when costs are already high.
Funding patterns also shifted.
Deposits placed with OFCs fell sharply from Tk 18,518 crore in March to Tk 143,72 crore in June this year a drop of 22 per cent in just one quarter.
These deposits usually come from companies or wealthy individuals placing money for short periods rather than from regular savers.
The decline suggests depositors either withdrew funds for safety or needed cash for their own operations.
Lower deposits weaken the funding base of OFCs and limit their ability to lend or invest confidently.
A new category appeared this quarter: non-money-market-fund shares, which reached Tk 7,639 crore.
These funds invest in longer-term or higher-risk assets, unlike money-market funds that stick to safer short-term investments.
Meanwhile, retained earnings鈥攑rofits kept by institutions to strengthen their financial position鈥攆ell by more than 27 per cent.
The number of institutions covered in the report grew from 256 in March to 477 in June, as open-end mutual funds, close-end funds, asset-management companies and alternative investment funds were added.
These additions brought over Tk 10,000 crore in assets into the OFC sector.
Even after accounting for this expansion, the drop in deposits, rise in government investment and decline in business lending reflect real behavioural changes in the sector.