A significant challenge is approaching Bangladesh’s financial sector. Bangladesh Bank is set to initiate the liquidation process for 9 out of the country’s 35 non-banking financial institutions (NBFIs), effectively declaring them bankrupt and ceasing their operations. This marks a historic first for the nation, highlighting the sector’s instability and persistent mismanagement. Reports indicate that Bangladesh Bank is undertaking this action to safeguard the interests of depositors.
Sources from Bangladesh Bank reveal that by the end of the previous year, 73.5 percent of the sector’s defaulted loans were held by just 12 NBFIs. Initially, 20 institutions were categorized as ‘red’. When accountability was sought from these institutions in January, 9 of their responses were deemed inadequate. Consequently, Bangladesh Bank opted for their liquidation.
Experts view this decision as a pivotal moment for Bangladesh’s financial landscape. Economists suggest that the liquidation of these 9 NBFIs signifies not only the downfall of struggling institutions but could also herald a comprehensive restructuring of the entire sector in the future.
Data from Bangladesh Bank indicates that these 9 institutions accounted for over half of the non-performing loans within the NBFI sector at the close of last year.
The licenses that are being revoked include:
The institutions initially identified for liquidation are Fast Finance, Bangladesh Industrial Finance Company (BIFC), Premier Leasing, Faireast Finance, GSP Finance, Prime Finance, Aviva Finance, People’s Leasing, and International Leasing.
These institutions have faced a prolonged crisis due to non-performing loans and financial irregularities. As per data from Bangladesh Bank, the total non-performing loans in the NBFI sector reached Tk 25,890 crore by the end of 2024. These nine institutions account for over half of this total, approximately 52 percent of the non-performing loans.
The government has granted in-principle approval:
Bangladesh Bank Governor Dr. Ahsan H. Mansur stated that the government has provided in-principle approval. We are proceeding with this process solely to safeguard the interests of depositors. Ensuring the return of their funds will be our top priority.
He also mentioned that the liquidation process could commence as early as next month. To facilitate this, an application will be submitted to the High Court in accordance with the Finance Companies Act 2023. Bangladesh Bank will appoint one or more liquidators to carry out the liquidation through the court.
The governor noted that the proposals from all the institutions were deemed unacceptable. Consequently, there was no alternative but to advance through the legal process.
