B Mirror Report: The Bangladesh Bank has decided to liquidate six non-bank financial institutions (NBFIs) found to be in severe financial distress, while giving three other NBFIs a three-month window to stabilize their operations.

The decision came during a board meeting of the central bank held today. The three institutions granted the temporary reprieve are Bangladesh Industrial Finance Company (BIFC), GSP Finance Company, and Prime Finance and Investment Limited. Officials said these firms have committed to mobilize funds and recover a significant portion of defaulted loans within the next three months to avoid liquidation.

According to the central bank, the six NBFIs earmarked for liquidation are plagued by massive defaults, mismanagement, and financial irregularities. Among them, FAS Finance is the worst affected, with 99.93% of loans in default and losses of Tk1,719 crore, followed by Fareast Finance (98% defaulted, Tk1,017 crore loss), International Leasing (96% defaulted, Tk4,219 crore loss), People’s Leasing (95% defaulted, Tk4,628 crore loss), Aviva Finance (83% defaulted, Tk3,803 crore loss), and Premier Leasing (75% defaulted, Tk941 crore loss).

The three NBFIs given more time also face significant challenges. BIFC has 97.30% defaulted loans with losses of Tk1,480 crore, GSP Finance has 59% defaulted loans and losses of Tk339 crore, while Prime Finance carries 78% defaulted loans with losses of Tk351 crore.

Bangladesh Bank highlighted that these institutions were deemed “unviable” due to failure to return depositors’ money, extremely high non-performing loans, and insufficient capital. Administrators will be appointed to oversee the liquidation process of the six firms, while the three receiving extensions are seeking additional funds to improve their financial position.

Currently, Bangladesh has 35 NBFIs, of which 20 are classified as distressed, holding total loans of Tk25,808 crore. Of this, Tk21,462 crore (83.16%) is non-performing, compared to collateral value of only Tk6,899 crore. The remaining 15 NBFIs are relatively stable, with 7.31% non-performing loans, combined profits of Tk1,465 crore last year, and a capital surplus of Tk6,189 crore.

The central bank also assured that employees of institutions undergoing liquidation will receive all entitled benefits under service rules. Individual depositors of affected NBFIs are expected to recover their principal amounts, though not interest.