At the end of December last year, the amount of the classified loan of non-bank financial institutions (NBFI) was Tk13,016 crore which was Tk10,328 crore in its previous quarter (July-September).
According to the latest figures published by Bangladesh Bank (BB), the amount of classified loans has increased.
However, the classified loans decreased by Tk26 crore in the second quarter of 2021 to Tk10,328 crore. It again jumped by Tk1,429 crore in the third quarter and Tk1,259 crore in the last quarter of the year.
Of the total 13,016 crore classified loans, six institutions – Bangladesh Industrial Finance, Fareast Finance and Investment, FAS Finance and Investment, First Finance, International Leasing and Financial Services, Premier Leasing and Finance – held Tk7,916 crore or 60.81% of the total non-performing loans, as of December 2021, the Bangladesh Bank data said.
Economists said, the non-bank financial institution (NBFI) sector is beginning to face new challenges as the number of defaulted loans is increasing.
When asked about the alarming rise of the classified loans of the non-bank financial institutions, a Bangladesh Bank senior official, seeking anonymity, told Dhaka Tribune that: “As I told you earlier (regarding July-September quarter) 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 because many lenders had been hiding data of non-performing loans for long.”
“Many borrowers are now unable to repay loans as they were hit hard by the pandemic, which was another reason,” the official added.
"This crisis or classified loans are rising due to a wide range of corruption in five to seven financial organizations," said AB Mirza Azizul Islam, economist and former financial adviser to a caretaker government.
The economist thinks that Bangladesh Bank's weak monitoring system is responsible for this situation in the NBFI sector. He said: "A huge amount of money was taken in favour of different names from several non-bank financial institutions but those loans were not returned. The irregularities took place in front of Bangladesh Bank thanks to the weak monitoring by the central bank."
As of December 2021, the total disbursement of the 34 institutions stood at Tk67,354 crore, while around one-fifth or 19.33% of the disbursement was classified.
In 2020, the disbursement was Tk10,053 crore and classified loans were 15.02%.
Out of 34 financial institutions, 12 institutions – Aviva finance, CVC Finance, Fareast Finance and Investment, First Finance, Industrial and Infrastructure Development Finance, Infrastructure Development, MIDAS Financing, National Finance, Phoenix Finance and Investments, Premier Leasing, Union Capital, Uttara Finance – saw up to 300% surge in classified loans in 2021, according to the central bank’s quarterly report.
Besides, others also witnessed slight increases in such loans in the Covid-hit year, raising the total classified loans by Tk2,957 crore or 29.41% year-on-year.
The irregularities of the non-bank financial institution sector came to light one after another, especially after the fall of People's Leasing in 2019. Later, the Bangladesh Bank marked several troubled institutions – including International Leasing and Financial Services, and Bangladesh Industrial Finance – red and kept them under special monitoring.
