Bangladesh Bank has moved to shut down or liquidate nine non-bank financial institutions (NBFIs), while giving three others time to improve their financial health.
The central bank’s board took the decision at a meeting on Tuesday, chaired by Governor Ahsan H Mansur. Bangladesh Bank Executive Director and spokesman Arif Hossain Khan confirmed the decision.
In the first phase, the regulator decided to close FAS Finance, Premier Leasing, Fareast Finance, Aviva Finance, People’s Leasing and International Leasing. Bangladesh Bank cited persistently high default loans, long-standing irregularities and repeated failures to return depositors’ funds as key reasons behind the move.
At the same time, the central bank allowed GSP Finance, Prime Finance and Bangladesh Industrial Finance Company Ltd. (BIFC) three to six months to improve their financial indicators. Bangladesh Bank said it would bring these institutions under liquidation if they fail to show satisfactory progress within the deadline.
In May last year, Bangladesh Bank issued show-cause notices to 20 NBFIs over high default loans and failures to repay depositors, asking why it should not take liquidation measures against them. After subsequent evaluations, the regulator found the recovery and turnaround plans of nine institutions unsatisfactory and decided to proceed with closure.
Officials said prolonged mismanagement and weak governance pushed default loan ratios at these institutions to between 75 percent and 98 percent.
Bangladesh Bank began hearings last week to examine whether the institutions had any valid grounds to oppose liquidation. The hearings ended on Sunday. A senior central bank official, speaking on condition of anonymity, said the institutions presented their business plans and arguments during the hearings. Based on the submissions, the board approved the decision to grant three institutions time to improve their financial condition.
Sector insiders blamed widespread irregularities and scandals during the previous government for the surge in default loans. They pointed to allegations that former NRB Global Bank Managing Director PK Halder embezzled at least Tk35 billion from four NBFIs—People’s Leasing, International Leasing, FAS Finance and BIFC.
At a recent news conference, Governor Mansur said individual depositors of the nine troubled NBFIs would receive their principal amounts in February, before Ramadan. Bangladesh Bank will begin assessing the assets of the institutions to determine whether they hold positive or negative value. The assessment will also decide whether shareholders receive any money.
Central bank officials said the government has verbally approved about Tk50 billion to repay depositors. Depositors will receive only their principal amounts, with no interest.
Bd-pratidin English/ANI
