BB closes chapter of five troubled NBFIs with liquidation push

The Bangladesh Bank (BB) has finally drawn a line under one of the country's longest-running financial failures by removing the boards of five deeply troubled non-bank financial institutions and moving ahead with liquidation, signalling that years of regulatory patience have come to an end.

The central bank's decision affects FAS Finance, International Leasing, Fareast Finance, People's Leasing and Aviva Finance, where defaulted loans range from nearly 94 per cent to almost 100 per cent. After years of mounting loan irregularities, governance failures and repeated rescue attempts, the institutions have reached a point where recovery is no longer considered realistic.

The most immediate concern is the fate of depositors, and the BB has sought to provide reassurance by planning to return up to Tk10 lakh in principal deposits to each individual depositor. The move marks a significant effort to restore confidence in a financial system that has seen trust steadily eroded as financial scandals and unpaid loans accumulated across the sector.

That assurance, however, has limits. Interest earnings are unlikely to be recovered, while depositors with balances above Tk 10 lakh may face a lengthy and uncertain wait. Institutional depositors are expected to stand further back in the repayment queue and will depend largely on future asset sales and loan recoveries.

The scale of the crisis explains the urgency. In all five institutions, non-performing loans have crossed 90 per cent, leaving balance sheets effectively hollow. Years of weak oversight, poor governance and alleged financial misconduct have left little prospect of recovering much of the money that was lent out.

The latest action follows the central bank’s in-principle approval of liquidation in May. While that decision established regulatory intent, the removal of boards and appointment of administrators turns the process into reality. The question is no longer whether these institutions can survive but how their remaining assets will be managed and distributed.