'Bangladesh Bank would not be able to properly monitor all the banks and NBFIs if their number would increase further'
Bangladesh Bank on Monday night approved a new non-banking financial institution (NBFI) while the sector is currently reeling under the burden of a huge amount of defaulted loans.
The central bank at a board of directors' meeting at its headquarters made the decision to issue letter of intent (LoI) to the proposed Strategic Finance and Investment Ltd (SFIL).
Governor Fazle Kabir presided over the meeting.
Anjuman Ara Shahid, wife of Padma Bank (formerly Farmers Bank) Chairman Chowdhury Nafeez Sarafat, is the chairman of the proposed SFIL, according to a central bank high official.
“The board meeting has decided to issue LoI to the NBFI after scrutinizing all required documents,” said Md Serajul Islam, spokesperson and an executive director of the central bank.
He said licence to the new NBFI would be issued soon after the proposed NBFI met the requirements of enhanced paid-up capital criteria and the authorities were reviewing its documents.
“The central bank board decided to issue LoI to the SFIL as it will bring foreign investment and be lending to the industrial sector. The new NBFI board is comprised with an individual and six local companies. Of the six, two will bring foreign investments,” said Md Serajul Islam.
Talking to Dhaka Tribune, Bangladesh Bank former deputy governor Khondker Ibrahim Khaled said the move was not proper on part of the central bank as the NBFI sector was in a critical condition at the moment.
Bangladesh Bank would not be able to properly monitor all the banks and NBFIs if their number would increase further, he added.
According to a central bank report, only four out of the 34 NBFIs are running their business smoothly.
At the end of June last year, the total defaulted loans in NBFIs amounted to Tk8,038 crore, up 47.21% from six months earlier, according to data from the central bank.
In July of 2019, the central bank started the process of liquidating People Leasing and Financial Services as the NBFI failed to repay depositors’ money despite maturity of the funds.