Default loans at the non-bank financial institutions (NBFIs) soared 15 per cent to Tk 10,244.7 crore between July and September despitethe loan moratorium facility offered by the central bank.
Earlier on March 24, as the coronavirus was putting down its roots in Bangladesh, the central bank asked the NBFIs to keep classification unchanged until June to help the borrowers tide over the economic shock. The loan moratorium facility has since been extended to the end of 2020.
And yet, the loans kept on turning sour at the 33 NBFIs as the central bank took its eye off them amid the mountain of challenges it found itself in for the pandemic.
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.
To put things into perspective, default loans soared 49.8 per cent from a year earlier at the NBFIs.
Four or five NBFIs in their reports showed a low amount of defaulted loans but the real picture of their bad loans came to light after the central bank inspection, said Mominul Islam, chairman of the Bangladesh Leasing and Finance Companies Association.
As a result, the default loans of the NBFIs sector has increased in recent times despite the moratorium facility, said Islam, also the managing director of IPDC Finance.
“The sector is facing an image crisis owing to the four or five NBFIs,” he said, adding that IPDC’s performance is “very good”.
Most of IPDC’s clients are repaying their loans despite the moratorium facility, Islam added.
Lack of proper supervision and monitoring of the central bank is responsible for the bad performance of the NBFIs, said Khondokar Ibrahim Khaled, a former deputy governor of the Bangladesh Bank.
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.
“Had the BB followed the law, PK Halder would not have been able to leave the country.”
Halder, a former MD of NRB Global Bank and Reliance Finance, allegedly embezzled about Tk 3,500 crore from four of the NBFIs, which has had an enormous effect on the entire sector.
He controlled the majority shares of the International Leasing and Financial Services (ILFSL) after buying them under the names of different individuals, including his family members, according to the central bank probe report.
The impact of the loan moratorium facility would be reflected in the fourth quarter of last year, said Arif Khan, MD of IDLC Finance.
A large number of borrowers have lost their ability to repay the loans owing to the pandemic.
“However, the economy is recovering from the recession.”
