The non-bank financial institution (NBFI) sector is beginning to face new challenges as the number of defaulted loans is increasing.
According to the latest figures published by Bangladesh Bank (BB), the amount of defaulted loans has increased by Tk1429 crore in the first quarter (July-September) of the current fiscal year as compared to the fourth quarter (April-June) of the last FY2021.
As Bangladesh Bank cancelled the loan moratorium facility last December, it would increase the number of default loans in the next quarter (October-December), economists and bankers warned.
The central bank’s data shows that the amount of defaulted loans of the non-bank financial institutions (NBFIs) has reached the tune of Tk11,757 crore after September.
At the end of the June quarter, the amount of the defaulted loan was Tk10,328 crore, which was 15.39% of the total credit. The amount increased to Tk11,757 crore in the following September quarter.
"The NBFI sector has been facing an image crisis due to a wide range of corruption in five to seven financial organizations. The crisis has risen in the last two years and I think it is starting to have an effect on the whole sector," said AB Mirza Azizul Islam, economist and former financial adviser to a caretaker government.
There are 34 NBFIs in the country of which six are on the verge of collapse with excessive default loans, provision and principal amount deficit.
The six institutions are Bangladesh Industrial Finance Company (BIFC), Fareast Finance and Investment Limited, FAS Finance and Investment, First Finance Ltd, International Leasing and Financial Services and Premier Leasing and Finance.
According to a previous report released by the central bank, the defaulted loans of six NBFIs in the country amounted to Tk6,916.6 crore till June last year, and the total defaulted loan of the 34 NBFIs in the country was Tk10,328 crore.
Meanwhile, the CAMELS rating of the central bank revealed that the amount of the total defaulted loan is 66.96% of the loans given by these six NBFIs.
Seeking anonymity, a Bangladesh Bank official said: “This rising amount of debt growth does not seem to stop there. As the central bank canceled the loan moratorium facility, the number of defaulted loans is likely to increase further in the December quarter”
“Negligence to scrutinize while giving loans to any company has increased the number of default loans in the whole NBFI sector. However, at the beginning of this year, the surveillance of NBFIs has increased. A Bangladesh Bank directive has also been issued in this regard which will improve the situation in the third quarter (January-March) of the current fiscal year,” the official added.
In March last year, the amount of defaulted loans of NBFIs was Tk10,354 crore which fell by Tk26 crore in June.
Meanwhile, former lead economist of the World Bank Zahid Hossain thinks that Proshanto Kumar Halder's (PK Halder) money laundering and the failure to bring him to justice is one of the major reasons behind the ongoing crisis in the NBFI sector.
He said: "I think PK Halder and his associates are largely responsible for the ongoing crisis because those others who have taken loans from the NBFI sector think they will be able to get away with it as well. The central bank can't avoid its responsibility as it had kept silent when the money was being looted from the NBFIs."
He added saying that the government and the central bank should take strict measures against the defaulters and that BB should make assessment quality reviews on NBFIs so that well-performing institutes are not harmed in the process.
Arifur Rahman, a depositor told Dhaka Tribune that he had made a fixed deposit of Tk50,000 in an NBFI company a couple of years ago in the hope of earning more interest than the banks, but after the PK Halder incident and the condition of the customers of People's Leasing, he took out the money and kept it in a bank instead.
Like him, there are many others who are doing the same, suggesting that the image crisis is taking a toll on the entire NBFI sector as people are losing confidence.
Proshanto Kumar Halder, former managing director of NRB Global Bank and Reliance Finance, allegedly embezzled around Tk3,500 crore from four NBFIs.
ACC interrogates four officials of BB
Meanwhile, the Anti-Corruption Commission (ACC) has continued its investigation of financial institutions.
The ACC is questioning four senior officials of Bangladesh Bank regarding Proshanto Kumar Haldar and his associates about loan fraud, embezzlement and smuggling.
A team led by the agency's deputy director and investigation officer interrogated them at the ACC head office in Segunbagicha on January 24.
The four officers are Joint-Directors of Financial Institutions Inspection Department of Bangladesh Bank, Mohammad Ferdous Kabir, ABM Mubarak Hossain, Deputy Director Md Hamidul Alam and Assistant Director Md Quader Ali.
