Deposits to NBFIs rise, loan distributions fall

The non-bank financial institutions (NBFIs) have witnessed a boost in deposits even amid the Covid-19 pandemic, reaching Tk44,536 crore in June 2021 – an increase of Tk418 crore compared to same month last year.

However, the amount of loans distributed by NBFIs has declined during this period, going down from Tk67,159 crore to Tk67,094 crore when compared year on year – showing a decrease of Tk65 crore.

Industry insiders said the NFBIs have taken a more cautious approach in disbursing loans, and this is why the amount of disbursements has dropped by some amount. Moreover, NBFIs’ loan interest rate is comparatively higher, so most customers are going to the banks instead.

IPDC Finance Ltd’s Managing Director and CEO Mominul Islam told The Business Post, “The larger institutions are not facing any big issues regarding deposits, but the smaller ones are witnessing disinterest from their customers because of the People’s Leasing and Financial Services Ltd incident.

“Banks are also showing disinterest in giving funds to smaller NBFIs, making their situation more difficult. But the market now has excess liquidity, so these institutions are making a recovery. We are making an effort with the Bangladesh Bank to further boost this sector.”

Mominul, who is also the chairman of the Bangladesh Leasing and Finance Companies Association, continued, “If a company possesses a good reputation, if their amount of defaulted loans is low, it will not be difficult for them to attract deposits.

“Besides, the amount of loan disbursements in the sector is now relatively low.”

Latest central bank data shows that at the end of March this year, non-performing loans (NPLs) in 34 NBFIs stood at Tk10,353 crore – 15.46% of the total outstanding loans. At the same time, the total outstanding loans in the sector stood at Tk66,962 crore.

Amid the Covid-19 epidemic, the Bangladesh Bank had given a number of policy assistance to the country’s NBFIs, extending more liquidity assistance to them. It also had repeatedly instructed the banks not to withdraw deposits from such institutions.

A central bank official – on condition of anonymity – said, “Because of some weak institutions, there has been a negative impact on the sector as a whole. The investment and business of the NBFIs have decreased due to irregularities of several companies – including the People’s Leasing Ltd.

“The amount of deposits of NBFIs has increased due to excess liquidity in the market.”

On the issue, Bangladesh Bank Executive Director and spokesperson Serajul Islam said, “The overall condition of the financial institutions is not bad. The central bank is taking steps so help weaker institutions grow again.”