B Mirror Report: Bangladesh Bank is fully prepared to initiate the liquidation process of six non-bank financial institutions (NBFIs) that have been struggling due to irregularities, corruption, and mismanagement.

Officials of the central bank have confirmed that the process will begin before Eid if the government releases the necessary funds.

A senior official of Bangladesh Bank told TBS that Tk 5,600 crore has been requested from the Ministry of Finance to proceed with the liquidation.

“In a reply letter, they asked us to assess the preparation stage and legal procedures. We have sent another letter outlining our overall preparedness. We hope to receive the funds before Eid,” the official said.

He further added, “The Finance Division has informed us that the money will be disbursed in two phases. In the first phase, Tk 2,600 crore will be provided. The remaining Tk 3,000 crore will be released by June.”

“As soon as we receive the first tranche, we will appoint administrators to the respective institutions. Their primary task will be to repay the deposits of individual depositors. After settling individual depositors’ claims, we will apply to the court for formal liquidation of the institutions.”

Earlier, on January 27, the board of Bangladesh Bank decided to liquidate six institutions. At the same meeting, three other institutions were given three to six months’ time.

The three institutions granted time are: Bangladesh Industrial Finance Company (BIFC), GSP Finance Company, and Prime Finance & Investment Limited.

An official from the Financial Institutions and Markets Department of the central bank said the three institutions that have been granted time must arrange funds within the stipulated period and inform Bangladesh Bank.

“If these institutions can recover a significant portion of their defaulted loans, they may be excluded from the liquidation process,” he said.

Currently, there are 35 non-bank financial institutions in the country. Of them, 20 have been identified by the central bank as troubled.

These 20 institutions have total loans amounting to Tk 25,808 crore, of which Tk 21,462 crore (83.16 percent) are defaulted. In contrast, the value of their collateral stands at only Tk 6,899 crore.

On the other hand, the 15 relatively healthy institutions have a default loan rate of only 7.31 percent. Last year, they made a profit of Tk 1,465 crore and have a capital surplus of Tk 6,189 crore.

The 20 troubled institutions hold deposits totaling Tk 22,127 crore, including approximately Tk 4,971 crore in net individual deposits. Bangladesh Bank believes that this amount may initially be required to support the liquidation and restructuring process.

The regulator has also assured that employees will receive all benefits as per service rules after liquidation.

According to Bangladesh Bank’s review, nine institutions are considered “non-viable” based on three indicators: failure to repay depositors, high default loans, and capital shortfalls.

Among the six selected for liquidation, 99.93 percent of FAS Finance’s total loans are defaulted, with accumulated losses of Tk 1,719 crore.

Far East Finance has 98 percent of its loans defaulted, with losses of Tk 1,017 crore. International Leasing has default loans of Tk 3,975 crore (96 percent), nearly all of which are irrecoverable, and losses of Tk 4,219 crore.

People’s Leasing has a 95 percent default rate and losses of Tk 4,628 crore. Aviva Finance has 83 percent default loans and losses of Tk 3,803 crore. Premier Leasing has 75 percent default loans and losses of Tk 941 crore.

Among the remaining three institutions granted time, GSP Finance has a 59 percent default rate and losses of Tk 339 crore. BIFC has a 97.30 percent default rate and losses of Tk 1,480 crore. Prime Finance has 78 percent of its total loans defaulted, with losses of Tk 351 crore.