• Thursday, Apr 15, 2021
  • Last Update : 10:47 pm

BB seeks proposal from BLFCA to reconstruct poorly NBFIs

  • Published at 01:00 am February 18th, 2021
Bangladesh Bank central bank head office
The Bangladesh Bank headquarters in Motijheel Mahmud Hossain Opu/Dhaka Tribune

The recommendation proposal should be submitted within February 24

The Bangladesh Bank on Wednesday 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 ailiNBFIs. 

The recommendation proposal should be submitted within February 24. 

The central bank instruction came up in a meeting with the BLFCA delegation led by its Chairman Mominul Islam at the BB’s headquarters in Motijheel. 

BB Deputy Governor Ahmed Jamal presided over the meeting, which was attended by BB Executive Director Mohd Humayun Kabir and other officials. 

“We are concerned about the present situation of the NBFIs sector,” said an official of the BB present at the meeting on condition of anonymity to speak candidly on the matter.

The BB warned the chief executives of the NBFIs from involving in any form of irregularities.

In a number of the ailing NBFIs, the CEOs and other top officials were found to be involved in corruption.

Contacted, BB Spokesperson Md. Serajul Islam declined to elaborate on the contents of the meeting. “It was just a courtesy meeting,” he added.

“We discussed the overall situation of the NBFI sector,” Mominul Islam, also the managing director and chief executive officer of IPDC, told Dhaka Tribune yesterday.

The NBFI sector is going through an image crisis owing to the 5-6 ailing institutions, he said.

“We called upon the central bank to reconstruct those NBFIs.” 

This prompted the BB to seek a proposal for an action plan from the delegation. 

The forum requested the BB to make a refinance scheme worth at Tk 4,000 crore for the small and weak NBFIs as those are suffering from a liquidity crisis after several banks pulled deposits from them, Islam added.

In March last year, the BLFCA had also sought a Tk 10,000 crore refinancing scheme from the BB to salvage the debilitating sector as the NBFIs had faced a huge liquidity crisis.  

But, the BB did not respond positively then. 

Last year, the sector had faced a huge liquidity crisis as most institutional and individual depositors were withdrawing their money from the sector owing to the liquidation process of People’s Leasing and Financial Services (PLFS). 

The central bank inspection team found at least 10 NBFIs were involved in loan scam 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.

At the end of the third quarter of 2020, the 33 NBFIs’ bad loans accounted for about 15.5 per cent of their total outstanding loans of Tk 66,215.4 crore, according to data from the central bank. 

Three months earlier, default loans accounted for 13.3 per cent of the outstanding loans. 

Meanwhile, the central bank on February 15 formed a five-member committee to investigate the irregularities in the NBFIs. 

BB Spokesperson Islam confirmed the formation of the committee to Dhaka Tribune. 

The committee, which will be led by AKM Sajedur Rahman Khan, deputy governor of the BB, said Islam, himself an executive director.

The role of the concerned institutions, as well as those who were in charge of the BB during these incidents, will also be examined by the committee.

The central bank step comes after allegations surfaced of BB Executive Director Md. Shah Alam’s abetment in Halder’s irregularities and corruption.

Rashedul Haque, a close aide of Halder and also a former MD of ILFSL, made the allegation in his confessional statement before a Dhaka court on February 2.

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