The Bangladesh Bank has decided to begin the process of winding up five troubled non-bank financial institutions (NBFIs). As part of the move, administrators will be appointed after dissolving the institutions’ boards of directors. The central bank has said that individual depositors of these institutions will be able to recover up to Tk1 million each.
The decision was taken at a board meeting chaired by Bangladesh Bank Governor Md Mostaqur Rahman at the central bank’s headquarters yesterday. The meeting reviewed the condition of nine financial institutions that have been facing prolonged financial distress.
According to Bangladesh Bank sources, the five institutions selected for resolution are FAS Finance, Fareast Finance, Aviva Finance, Peoples Leasing and Financial Services, and International Leasing and Financial Services.
Meanwhile, Bangladesh Industrial Finance Company (BIFC), Premier Leasing and Finance, GSP Finance and Prime Finance have been given three months to demonstrate their ability to recover. If they fail to show within this period that they can repay the principal amounts owed to individual depositors, they too will be brought under the resolution or liquidation process.
A Bangladesh Bank official said the five institutions earmarked for closure hold deposits worth approximately Tk27 billion belonging to around 27,000 individual depositors. In the first phase, their boards will be dissolved. Administrators will then assess the institutions’ assets and liabilities and begin the process of repaying depositors.
According to the latest Bangladesh Bank data, as of last December, non-performing loan ratios had reached 99.99% at FAS Finance, 98.50% at Fareast Finance, 93.93% at Aviva Finance, nearly 95% at Peoples Leasing, and 99.44% at International Leasing.
Due to soaring bad loans, liquidity shortages and failure to repay depositors, Bangladesh Bank issued show-cause notices to 20 NBFIs in May last year. After evaluating their recovery plans, nine institutions were identified as high-risk. Following a series of reviews, the central bank has now taken a preliminary decision to place five of them under liquidation or closure proceedings.
Industry insiders say the financial condition of these institutions deteriorated over the years because of irregularities, weak corporate governance and loan scandals. In particular, controversial businessman PK Halder has been accused of embezzling around Tk3.5 billion from Peoples Leasing, International Leasing, FAS Finance and BIFC.
