Bangladesh Bank has decided to liquidate six non-bank financial institutions (NBFIs) that are in severe financial distress, while allowing three others a three-month window to improve their condition.
The decision was taken at a meeting of the central bank’s board on 27 January, following a detailed review of the sector. The regulator cited long-standing irregularities, corruption, weak governance and chronic mismanagement as key reasons behind the move.
The three institutions given temporary relief are Bangladesh Industrial Finance Company (BIFC), GSP Finance Company and Prime Finance and Investment Limited. A central bank official said these companies will not face liquidation for now, as they have pledged to mobilise funds and recover defaulted loans within the next three months. Failure to make meaningful progress during this period will likely lead to liquidation.
According to Bangladesh Bank’s assessment, BIFC’s defaulted loans stand at 97.30%, with accumulated losses of Tk1,480 crore. GSP Finance has 59% of its loans classified as non-performing and has incurred losses of Tk339 crore. Prime Finance has 78% defaulted loans, with losses amounting to Tk351 crore.
The six NBFIs marked for liquidation were found to be “unviable” based on three critical indicators: inability to repay depositors, extremely high levels of defaulted loans, and severe capital shortfalls.
FAS Finance is the worst affected, with 99.93% of its loans in default and losses of Tk1,719 crore. Fareast Finance follows closely, with 98% defaulted loans and losses of Tk1,017 crore.
At International Leasing, defaulted loans total Tk3,975 crore, accounting for 96% of its portfolio, most of which the central bank considers unrecoverable. Its accumulated losses have reached Tk4,219 crore. People’s Leasing has 95% bad loans and losses of Tk4,628 crore.
Aviva Finance has seen 83% of its loans turn non-performing, with losses of Tk3,803 crore. Premier Leasing, though comparatively less distressed, still has 75% defaulted loans and losses of Tk941 crore.
Bangladesh currently has 35 NBFIs, of which 20 have been identified as financially distressed. The total loan portfolio of these 20 institutions stands at Tk25,808 crore. Of this amount, Tk21,462 crore—around 83.16%—is classified as defaulted, while the value of available collateral is only Tk6,899 crore.
In contrast, the remaining 15 relatively stable NBFIs have a non-performing loan ratio of just 7.31%. Last year, they posted a combined profit of Tk1,465 crore and currently hold a capital surplus of Tk6,189 crore.
The 20 troubled institutions hold deposits worth Tk22,127 crore, including around Tk4,971 crore in net individual customer deposits. Bangladesh Bank said this amount may be required initially to support the liquidation and restructuring process.
The central bank has also assured that employees of institutions placed under liquidation will receive all dues and benefits in line with existing service rules.
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