The governor announced that the government has verbally consented to allocate 5,000 kronor for payments to depositors. Additionally, Samirit Islamic Bank has received its license.
Bangladesh Bank is progressing towards liquidating nine struggling non-bank financial institutions (NBFIs). Their board recently approved the liquidation under the newly established Bank Resolution Ordinance 2025, which marks the country’s first comprehensive process for addressing failed banks and non-banks.
This ordinance outlines the procedures for consolidating, restructuring, and shutting down failed financial institutions, while also establishing a hierarchy for repaying creditors from asset sales.
The BB board, led by Governor Ahsan H. Mansour, gave the green light for this plan yesterday, allowing the regulator to officially close down the institutions, assign a liquidator, liquidate assets, and distribute the proceeds to claimants, as confirmed by a senior central bank official who wished to remain anonymous.
This action aligns with other significant efforts within the financial sector, such as the merger of five troubled Islamic banks. The BB board has also approved the newly formed Samirit Islamic Bank, which is set to become the largest banking merger in the country’s history and the biggest Islamic bank in Bangladesh.
The liquidation of these NBFIs and the merger of banks signify a shift towards more assertive regulatory measures after years of decline in the financial system.
The nine NBFIs being liquidated include FAS Finance, Bangladesh Industrial Finance Company, Premier Leasing, Fareast Finance, GSP Finance, Prime Finance, Aviva Finance, People’s Leasing, and International Leasing.
Together, these institutions represent 52% of the total default loans in the NBFI sector, totaling Tk 25,089 billion at the end of last year. This reflects years of unchecked loan fraud and dwindling capital.
The average net asset value of seven of these eight NBFIs is negative Tk per share, leaving them with little chance of meeting obligations without government help. Essentially, after selling a company’s assets and clearing debts, common shareholders are often left with little or nothing.
This BB board approval comes amidst concerns that financial institutions have defaulted on repaying depositors, many of whom have been waiting for money for months, or even years, despite their schemes maturing.
Governor Mansour stated that BB would soon appoint a liquidator. He reassured that depositors would be prioritized in the distribution of liquidation proceeds, saying, “The government has given verbal approval to repay around Tk500 billion to the depositors of these NBFIs.”
Mansour emphasized that the liquidation was being pursued primarily to safeguard depositors. “Restoring NBFI customers’ deposits is our main concern,” he noted.
For depositors, the decline of these NBFIs has been catastrophic. Issues related to lending irregularities, poor collection strategies, and excessive credit concentration have hampered these institutions’ ability to fulfill their commitments. Consequently, despite a mature financial system, customer savings are severely affected.
Khalil Ahmed Khan, a 64-year-old depositor with Aviva Finance, is one of many impacted. His deposit of Tk23 million matured in January, but he’s only managed to receive Tk8.98 million so far. His meetings with NBFI executives have been unproductive.
Khan, who suffers from hypertension and diabetes, shared that the prolonged delays have made it difficult to manage his medical expenses. “We desperately need money to pay for our treatment and membership fees,” he lamented.
According to BB’s data, Tk 15,370 crore belonging to individuals and institutions remains locked in these nine NBFIs. Individuals alone account for Tk352.5 billion while banks and corporate depositors hold Tk1184.5 billion.
People’s Leasing shows undisclosed personal deposits of Tk 140.5 billion, Aviva Finance has Tk 80.9 billion, International Leasing has Tk 64.5 billion, Prime Finance has Tk 32.8 billion, and FAS Finance holds Tk 10.5 billion.
Industry experts indicate that the challenges faced by the NBFI sector are deeply entrenched. Unlike banks, non-banks aren’t subject to the same stringent oversight, resulting in accumulated fraud and governance issues over the years.
Some institutions have continued to report inflated asset values and minimized losses, masking deteriorating financial conditions until they became untenable.
Earlier this year, the Central Bank’s Department of Financial Institutions identified nine NBFIs for closure and forwarded their names to the Bank Resolution Department. This decision stemmed from an assessment ten months prior when BB classified 20 NBFIs as severely underperforming, categorizing them in the ‘red’ zone due to high default rates and depleted capital.
The remaining 11 NBFIs include CVC Finance, Bay Leasing, Islamic Finance, Meridian Finance, Hajj Finance, National Finance, IIDFC, Uttara Finance, Phoenix Finance, First Finance, and Union Capital.
BB has requested a viable recovery strategy for these remaining institutions.
