BB approves closure process for 9 failing NBFIs
Business Report :
Bangladesh Bank is finally set to take strict and sweeping actions to restructure the crisis-hit non-banking financial institutions (NBFI) sector, which has long suffered from widespread irregularities, weak governance, and the burden of defaulted loans.
The central bank’s board has given final approval on Monday to begin the formal winding-up process of nine severely distressed NBFIs under the Bank Resolution Ordinance-2025.
The decision was made at a board meeting held on Sunday (November 30), chaired by Governor Ahsan H Mansur. It is being regarded as the most decisive and historic step taken by the regulator to restore financial discipline in the country’s NBFI sector. The institutions marked for closure are FAS Finance, Bangladesh Industrial Finance Company (BIFC), Premier Leasing, Fareast Finance, GSP Finance, Prime Finance, Aviva Finance, People’s Leasing and International Leasing.
These institutions alone account for 52 percent of the total defaulted loans in the NBFI sector, amounting to Tk 25,890 crore at the end of last year. Furthermore, the net asset value per share of eight of these companies stands at a staggering negative Tk 95, indicating that repaying liabilities is impossible without major government support.
With formal approval in place, Bangladesh Bank will now move toward closing the institutions, appointing liquidators, selling their assets and distributing the proceeds among creditors. One of the most serious grievances against these NBFIs has been their inability to return deposits to customers. Many deposit schemes matured years ago, yet depositors have been waiting indefinitely for their money.
Governor Ahsan H Mansur said that depositors would be refunded before liquidation begins and that the government has given verbal approval to release around Tk 5,000 crore for this purpose. According to central bank data, the total amount of stuck deposits in the nine institutions stands at Tk 15,370 crore. Of this, Tk 3,525 crore belongs to individual customers, while Tk 11,845 crore is tied to bank and corporate deposits. The largest portions of these pending deposits are stuck in People’s Leasing, Aviva Finance, International Leasing, Prime Finance and FAS Finance.
Industry experts point to long-standing weak governance, opaque financial reporting, inflated asset valuations, concealed losses and systemic irregularities as the root causes of the sector’s deterioration. A senior official revealed that during a 10-month assessment, 20 NBFIs were classified under the “red category,” and the nine most distressed institutions were selected for immediate closure. The remaining weak institutions include CVC Finance, Bay Leasing, Islamic Finance, Meridian Finance, Hajj Finance, National Finance, IIDFC, Uttara Finance, Phoenix Finance, First Finance and Union Capital.
Earlier, Bangladesh Bank had also decided to merge five weak Shariah-based banks into a consolidated Islamic bank. Experts say that both the merger decision and the liquidation process indicate that the central bank is no longer willing to tolerate mismanagement, corruption or irregularities in the financial sector.