NBFIs’ bad loans soar sharply

The Non-Bank Financial Institutions’ (NBFIs) bad loans increased by Tk 2, 920 crore in the first half of this year due to widespread irregularities and corruption.

The total bad loans of 34 NBFIs stood at Tk 15,936.42crore as of June of 2022, accounting for 22.99 per cent of the sector’s total outstanding loans of Tk 69,331.72 crore, according to the Bangladesh Bank’s latest data.

The defaulted loans of NBFIs stood at Tk 13,016 crore at the end of December of last year and increased by Tk 5,608.42 crore in the last one year until June this year.

The bad loans shot up in the sector as the mega relaxation of loan repayment expired in December of last year, said Industrial and Infrastructure Development Finance Company Managing Director Golam Sarwar.

The NBFI sector has been saddled with huge bad loans due to widespread irregularities and scams, according to BB officials.

Only five to six NBFIs out of 34 were doing well, according to them.

The BB data shows that ten NBFIs currently hold about 80 per cent of bad loans in the sector.

A BB inspection team recently found huge irregularities and scams in 10 NBFIs, including People’s Leasing, International Leasing, Premier Leasing, Uttara Finance, and First Finance.

In June 2019, the Finance Ministry ordered the BB to close People’s Leasing and Financial Services because they had failed to reimburse depositors’ money despite the funds’ maturity.

The decision exacerbated the sector’s problems, but instead of liquidating the NBFI, the government chose to restructure it.

Former BB Governor Salehuddin Ahmed told The Business Post, “The ailing NBFIs are the pocket institutions of big industry owners. Some more rules and regulations need to be introduced in the sector to control the situation and establish good governance.”