The Board of Directors of Bangladesh Bank has given preliminary approval to close or liquidate five non-bank financial institutions (NBFIs) due to severe loan defaults and failure to return depositor funds.
The decision was taken at a board meeting on Tuesday chaired by Bangladesh Bank Governor Mostakur Rahman. The liquidation process is expected to begin in July under the Bank Resolution Act.
The five institutions are FAS Finance, Fareast Finance, Aviva Finance, People's Leasing and International Leasing. According to Bangladesh Bank data, defaulted loans at these institutions range from about 94 percent to nearly 100 percent.
Officials said the institutions have failed for years to recover defaulted loans, making it impossible to repay depositors. Bangladesh Bank approved the move after repeated failures to return customer deposits.
Under the liquidation process, Bangladesh Bank will appoint one director as administrator for each institution along with two additional officials. The institutions will then be formally declared inactive.
A central bank official said around Tk 5,000 crore will be needed to repay individual depositors. Bangladesh Bank has received assurance from the government that funds may be allocated in the next national budget to support repayments.
The Bank Resolution Act outlines procedures for restructuring, merging or closing financially distressed institutions. The law also sets rules for repaying creditors through the sale of institutional assets.
In May last year, Bangladesh Bank asked 20 NBFIs to explain why they should not face closure due to high defaulted loans and failure to repay depositors. After reviewing recovery plans, the central bank moved forward with liquidation plans for several institutions.
Earlier discussions included Fast Finance, Bangladesh Industrial Finance Company (BIFC), GSP Finance, Prime Finance and Premier Leasing. However, some institutions were later removed from the liquidation list following further review.
According to Bangladesh Bank’s latest data as of December:
Industry insiders say widespread irregularities and financial scandals during the previous Awami League government contributed to the collapse of several NBFIs.
Former NRB Global Bank Managing Director PK Halder has been accused of embezzling at least Tk 3,500 crore from four financial institutions People's Leasing, International Leasing, FAS Finance and BIFC.
