The NBFIs' defaulted loans stood at Tk6,399 crore at the end of December 2019
Default loans at non-bank financial institutions (NBFIs) rose 57.10% last year despite the loan moratorium facility offered by Bangladesh Bank.
As of December last year, non-performing loans (NPLs) in the 33 NBFIs in the country stood at Tk10,053.60 crore, which are 15.02% of the total outstanding loans, according to the provisional data from the central bank.
The NBFIs' defaulted loans stood at Tk6,399 crore at the end of December 2019.
Earlier on March 24 last year, as the coronavirus pandemic was putting down its roots in Bangladesh, the central bank asked the NBFIs to keep classification unchanged until June to help borrowers tide over the economic shock.
The loan moratorium facility was extended until the end of 2020.
“It was a bad year for the financial sector and we were not able to increase the lending portfolio during the last year,” said Md Khalilur Rahman, managing director of National Housing Finance and Investment ltd.
Loan recovery from borrowers is also unsatisfactory in the overall NBFIs sector, except two or three NBFIs, as a large number of borrowers have lost their ability to repay the loans owing to the pandemic, said Rahman, also the former chairman of Bangladesh Leasing and Finance Companies Association (BLFCA).
"We hope that the rising number of NPLs would reduce in the current year," said National Housing Finance MD.
The sector is facing an image crisis owing to the four or five NBFIs, said another managing director of a NBFI, seeking anonymity.
He said that the government and the central bank should take initiative to reconstruct those ailing NBFI for the betterment of the entire NBFI sector.
In February this year, Bangladesh Bank asked the Bangladesh Leasing and Finance Companies Association (BLFCA), a forum of non-bank financial institutions, to submit a proposal about its recommendation for reconstructing the ailing NBFIs.
The BB also warned the chief executives of the NBFIs from involving themselves in any form of irregularities as a number of the ailing NBFIs, its CEOs and other top officials were found to be involved in corruption.
The central bank inspection team found at least 10 NBFIs were involved in loan scams and huge irregularities, which impacted the sector’s overall financial health.
Proshanta Kumar Halder, also known as PK Halder, a former MD of the NBFI Reliance Finance, allegedly embezzled about Tk 3,500 crore from four NBFIs: International Leasing and Financial Services (ILFSL), Peoples’ Leasing and Financial Services, Reliance Finance and FAS Finance and Investment.
He controlled the majority shares of the ILFSL after buying them under the names of different individuals, including his family members, according to the central bank probe report.
Lack of proper supervision and monitoring of the central bank is also responsible for the bad performance of the NBFIs, said experts.
The law states what to do if an NBFI goes bad, but the central bank is not following the law. As a result, a number of NBFIs went from bad to worse, they added.