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NBFI NPLs hit highest ever Tk19,951cr

ASM Saad
12 Oct 2023 22:03:49 | Update: 13 Oct 2023 20:10:22
NBFI NPLs hit highest ever Tk19,951cr

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.

NBFI NPLs rose by 25.20 per cent in June when compared year-on-year, despite the central bank’s regulatory forbearance. The country posted Tk 15,935 crore in NBFI non-performing loans back in June 2022.

In the case of People’s Leasing and Financial Services Ltd, Bangladesh Industrial Finance Company Ltd, International Leasing and Financial Services Ltd, FAS Finance & Investment Ltd, and First Finance Limited, and First Cornerstone Finance & Investments Ltd, NPL is over 80 per cent of their outstanding loans.

On condition of anonymity, a senior central bank official told The Business Post, “Embezzlements plague most of these NBFIs. Influential people take out loans, but do not pay those back. So the financial health of these companies has deteriorated.”

President of Bangladesh Leasing and Finance Companies Association (BLFCA) Golam Sarwar said, “The problem of non-performing loans in NBFI is a legacy issue. We are trying to solve this problem, and the governor of the central bank emphasises that we must show improvements.”

Sarwar serves as the managing director of Industrial and Infrastructure Development Finance Company Ltd.

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.

In just a decade, he used four companies – International Leasing and Financial Services, People's Leasing and Financial Services, FAS Finance, and Reliance Finance – to raise Tk 11,000 crore.

A managing director of a NBFI, preferring to be anonymous, said, “Sometimes we do not get back the money we had loaned due to the borrowers being influential. We tried to pressure these people to pay us back, but made no progress whatsoever.

“These borrowers are putting pressure on us instead, and authorities are yet to take any action against these people.”

Policy Research Institute Executive Director Ahsan H Mansur said, “The rising amount of NPLs is behind the poor health of the country’s NBFIs sector. Influential people took loans from these organizations and did not pay back.

“Irregularities were rampant then, and are still widespread now. The central bank could not take any action against them, so the Bangladesh Bank totally failed to ensure transparency in the NBFI sector.”

He added, “The central bank does not monitor the NBFI sector like it monitors banks. As a result, these NBFIs get the chance to engage in irregularities and culprits embezzle money from these institutions.

“The central bank should immediately cancel their licenses, but first ensure that people get their money back.” 

According to central bank data, the NPLs of NBFIs was much higher than the NPLs of the banking sector in recent times. The banking sector NPL stood at Tk 1.56 lakh crore or 10.11 per cent of the outstanding loans at the end of June this year.