B Mirror Desk : Twenty financial institutions in the nation have seen a major decline in their financial foundation, according a report released by Bangladesh Bank. Customers who have placed money in these institutions are allegedly unable to get their money back. The licenses or registration certificates of these non-banking financial institutions (NBFIs) are being revoked. The central bank has also contacted these organizations and asked them to provide justification for why their licenses shouldn’t be cancelled. Additionally, they have been given a 15-day window in which to reply to this email.
The institutions in question include: CVC Finance, Bay Leasing, Islamic Finance, Meridian Finance, GSP Finance, Hajj Finance, National Finance, IIDFC, Premier Leasing, Prime Finance, Uttara Finance, Aviva Finance, Phoenix Finance, People’s Leasing, First Finance, Union Capital, International Leasing, BIFC, Far East Finance, and FAS Finance.
Previously, the central bank had identified 20 financial institutions that have been facing prolonged crises, characterized by high default rates and an inability to repay customers. The collateral backing the loans of these institutions is also notably insufficient. In light of this situation, Bangladesh Bank is poised to make a conclusive decision regarding these NBFIs. Officials from the central bank indicate that appropriate actions will be taken following the receipt of responses to the letter. There may be initiatives to either merge or liquidate these institutions.
According to the documents from the central bank, there are 35 NBFIs operating in the country. Out of these, 20 are in a very critical condition. In December of last year, the total deposits of these institutions amounted to 22 thousand, which included 127 crore taka in institutional deposits and individual deposits also in crore taka. Additionally, the total loans issued by these 1,760 institutions reached 20 thousand 808 crore taka. A staggering 83 percent of these loans have defaulted, totaling 21 thousand 462 crore taka. The collateral backing these loans is valued at 6 thousand crore taka, which could potentially allow for the reimbursement of individual depositors using the collateral funds. The cumulative losses for the 20 institutions have reached Tk 23,448 crore. A report from the central bank indicates that these institutions are struggling to repay depositors, which is negatively impacting their financial health and overall performance. This situation is fostering distrust across the entire sector. The operations and market standing of sound institutions are being adversely affected, necessitating a turnaround.
The report further states that the annual salaries for the officers and employees of the 20 identified institutions total Tk 172 crore, with the managing directors earning Tk 12 crore. The overall expenses, including rent and other costs, amount to Tk 206 crore. These institutions lack any genuine interest income, highlighting the urgent need for restructuring and reactivation in accordance with legal requirements.
In a letter from the Bangladesh Bank addressed to the financially troubled institutions, it has been noted that various issues have been identified, such as insufficient assets to meet depositor liabilities, a high rate of classified loans, and irregularities in maintaining the minimum reserve capital, which affects capital adequacy. The letter also requests explanations from the relevant institutions regarding these matters and states that the institutions’ licenses should be communicated as per legal stipulations.
According to relevant sources, the entire sector is currently facing difficulties due to the irregularities perpetrated by Prashant Kumar (PK) Halder, a widely discussed individual in the financial industry, across various financial institutions. This includes several institutions that are owned and operated by PK Halder. At the time of these irregularities, PK Halder served as the Managing Director (MD) of a bank that was under the control of Mohammad Saiful Alam (S Alam), a close associate of former Prime Minister Sheikh Hasina. Following the destruction of financial institutions by PK Halder, S Alam extended this damage to Islamic banks as well. The entire financial sector is now in distress.
