The Bangladesh Bank's Board has approved the liquidation of nine struggling non-bank financial institutions, marking a significant intervention in the country's financial sector. This decision comes as part of the Bank Resolution Ordinance 2025, a comprehensive framework designed to address failing banks and non-banks. The ordinance outlines strategies for merging, restructuring, or closing distressed institutions and establishes a clear hierarchy for creditor repayment post-asset sale.
The BB Board, led by Governor Ahsan H Mansur, made this approval yesterday, paving the way for the regulator to take formal action. This includes shutting down the institutions, appointing liquidators, selling assets, and distributing proceeds to creditors. The move coincides with a major financial sector cleanup: the merger of five shariah-based banks, resulting in the establishment of the Sammilito Islami Bank, the largest Islamic bank in the country.
This aggressive intervention reflects the regulator's response to years of financial system deterioration. The nine selected NBFIs, which include FAS Finance, Bangladesh Industrial Finance Company, Premier Leasing, Fareast Finance, GSP Finance, Prime Finance, Aviva Finance, People's Leasing, and International Leasing, accounted for 52% of total defaulted loans in the NBFI industry, totaling Tk 25,089 crore at the end of last year. This situation is a result of unchecked lending irregularities and capital erosion.
Seven of these NBFIs have a negative net asset value, making it highly unlikely that they can meet their obligations without state intervention. Depositors, many of whom have been waiting for months or years for their matured schemes, are a priority. The government has verbally approved Tk 5,000 crore to repay depositors, with Governor Mansur emphasizing the priority of returning deposits to NBFI customers.
The situation has been devastating for depositors, with irregularities in lending, poor recovery practices, and an unchecked concentration of credit leaving institutions unable to meet their obligations. Customers' savings remain blocked, and individuals like Khalil Ahmed Khan, a depositor of Aviva Finance, are struggling to access their funds, causing financial hardship.
The BB has data showing Tk 15,370 crore in deposits, belonging to individuals and institutions, locked in these nine NBFIs. People's Leasing holds the largest volume of unreleased individual deposits, followed by Aviva Finance, International Leasing, Prime Finance, and FAS Finance. Industry insiders highlight the deep-rooted problems in the NBFI sector, noting the lack of rigorous supervision compared to banks, which allowed for the accumulation of scams and governance failures over the years.
