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Bangladesh Bank has instructed seven non-banking financial institutions (NBFIs) to reduce their non-performing loans (NPLs) and capital shortfall as soon as possible to maintain a healthy position.
Deputy Governor of the central bank Kazi Sayedur Rahman gave the directive to the managing directors of seven NBFIs at a meeting on Sunday. Chief Executive Officers of these NBFIs and BB officials were also present.
Bangladesh Bank observed that several NBFIs provided loans illegally, but borrowers did not repay it. So, NPL has been increasing in the non-banking financial sector. Besides, these NBFIs are facing capital shortfall as well.
Mezbaul Haque, Executive Director of the Bangladesh Bank, has confirmed this to The Business Post. He said that the central bank has observed that several NBFIs are facing capital shortfall and high non-performing loans due to widespread irregularities. “It's not good for the sector. As an authority, the central bank warns these institutions.”
He also said, “The central bank will warn again some NBFIs which will have to maintain and improve their financial condition as well. Every institution has different types of problems. So, we think that the solution should come from them.”
On August 27, the central bank sat with the MDs of the NBFIs, where 15 out of the 35 financial institutions in the country have defaulted loans of more than 32 per cent.
A senior official of a NBFI said in recent times, Bangladesh Bank has given the banks the facility to guarantee that no customer will become a defaulter if they pay half of the loan installments. But these instructions are not for the NBFIs. As a result, non-performing loans increased in NBFIs day by day.
He also said, “Due to some irregularities and bad images, deposit earnings have decreased in this sector. Many borrowers could not repay their loans on time due to poor business conditions.”
Default loans of non-bank financial institutions (NBFIs) in the country reached Tk 19,951 crore – 27.65 per cent of total loans – in June this year, putting into perspective the widespread allegations of corruption and irregularities faced by many such organisations.
The amount of NBFI NPLs rose by Tk 2,096 crore in June when compared to the March same year. This figure was Tk 17,855 crore – 25 per cent of the outstanding loans – in March, Bangladesh Bank sources say.
Outstanding loans of 35 NBFIs stood at Tk 72,150 crore at the end of this June.
Bangladesh witnessed a number of major scams hitting the NBFI sector in recent years. The case of PK Halder is one of them. With only 10 years of banking experience, Halder was promoted to the post of the managing director of Reliance Finance in 2009.
Such a short period to get the coveted position was unheard of in the sector. In July 2015, he joined as the managing director of NRB Global Bank.
What went under the radar during this period was Halder's other ventures. Between 2009 and 2019, Halder was busy birthing the biggest scandal in the country's financial sector.
