The Bangladesh Bank (BB) has moved to revoke the licences of nine Non-Bank Financial Institutions (NBFIs) over their failure to repay depositors, soaring default loans, and severe capital shortfalls. Once the decision takes effect, the institutions will cease operations.
Officials estimate the government will require around Tk 9,000 crore to liquidate these entities.
Earlier in May, BB had issued show-cause notices to 20 weak NBFIs, asking why their licences should not be cancelled. After failing to receive satisfactory responses, it has decided to close nine of them: People's Leasing and Financial Services, International Leasing and Financial Services, Aviva Finance, FAS Finance and Investment, Fareast Finance and Investment, Bangladesh Industrial Finance Company (BIFC), Premier Leasing and Finance, GSP Finance Company and Prime Finance and Investment Limited.
With the Governor's consent, BB's Resolution Department has been directed to begin liquidation measures. The central bank said depositors' money would be returned, while employees would receive benefits as per labour laws.
The nine NBFIs are burdened with staggering default rates. FAS Finance has 99.93% of its loans defaulted (Tk 1,814 crore), Fareast Finance 98% (Tk 1,017 crore), BIFC 97.3% (Tk 1,480 crore), and People's Leasing 95% (Tk 4,628 crore). International Leasing reported 96% defaults (Tk 3,975 crore), Premier Leasing 75% (Tk 984 crore), GSP Finance 59% (Tk 515 crore), and Prime Finance 78% (Tk 534 crore). Combined, the sector's accumulated losses from these institutions run into thousands of crores.
A BB review committee, formed in January, assessed 35 licensed NBFIs, examining loans, liquidity, and capital.
Of these, 20 were flagged as "troubled" due to excessive defaults and asset-liability mismatches. Others in this category include Union Capital, First Finance, Phoenix Finance, Uttara Finance, IIDFC, National Finance, Hajj Finance, Meridian Finance, Islamic Finance, Bay Leasing, and CVC Finance.
The review found that as of December 2024, the 20 troubled NBFIs had Tk 25,808 crore in loans, of which Tk 21,462 crore-or 83.16%-were classified as defaults. Mortgaged assets against these loans were valued at just Tk 6,899 crore, covering only 26% of liabilities. Their combined losses amounted to Tk 23,448 crore, with a capital deficit of Tk 19,218 crore.
In contrast, the 15 "comparatively sound" NBFIs reported defaults of only Tk 3,627 crore (7.31% of Tk 49,643 crore loans), backed by mortgaged assets worth Tk 29,169 crore. They posted profits of Tk 1,465 crore last year and maintained a capital surplus of Tk 6,189 crore.
Across the sector, NBFIs hold deposits worth Tk 48,966 crore and borrowings of Tk 18,613 crore from banks and peers. Troubled institutions account for Tk 22,127 crore of deposits, including Tk 5,760 crore in individual deposits. After loan adjustments, their net individual deposits stand at Tk 4,971 crore-an amount BB expects will be required initially for restructuring or merger plans.
The move to liquidate the nine NBFIs comes under the Finance Companies Act 2023, which allows cancellation of licences for reasons including operating against depositors' interests, insolvency, and failure to maintain minimum capital.
