NBFIs default loans soar 72pc in last two years

Staff Reporter :
Non-bank financial institutes (NBFIs) have been struggling with an increasing trend of defaulted loans as the rate surged by 72 per cent in last two years from the first quarters of this year to the same quarter of 2021.

The NBFI defaulted loan was Tk 10,353 crore in the first quarter(January- March) of 2021, which spiked by Tk 7527 crore at the end of March this year, as per the Bangladesh bank’s latest data.

The country’s 35 NBFIs had bad loansamounting to Tk 17,855 crore at the end of March, which is 25 per cent of the loans they had disbursed. Earlier, at the end of March last year defaulted loans stood at Tk 14,232 crore.

As a result, customers lose confidence as one-fourth of the total disbursed loan becomes bad loans.

The central bank showed, 16 of the NBFIs, the defaulted loan to outstanding loan ratio is over 30 per cent.

Among them six non-banks had around 90 percent of their loans classified at the end of March this year.

However, classified loans in 11 of the 35 NBFIs in the country remain below 10 percent of their outstanding loans even seven of these 11 NBFIs registered NPL ratios of less than 5 per cent.

Besides, Bangladesh Bank’s financial stability report-2022 said 14 NBFIs were in the red zone last year as per a stress test report.

Financial analysts said the main reasons for higher defaulted in non-banks are faults in borrower selection, lack of proper risk management, monitoring and management practices.

Sector people also mentioned that the credit disbursement process by NBFIs is less transparent than banks.

The institutions are now suffering as they had lent money to ghost companies without adequate verification.

A senior central bank official wishing not to be named said that many NBFI clients still do not bother about repayment despite most of the facilities ending in March.

There are also willful defaulters.

Meanwhile, Bangladesh Bank has instructed non-bank financial institutions (NBFIs) to reduce the amount of non-performing loans (NPLs) as they have to resolve the sector’s image crisis.

The instruction came at a meeting between the central bank and the Bangladesh Leasing and Finance Companies Association (BLFCA), a forum of chief executives of the NBFIs.

Presiding over the meeting, Bangladesh Bank Governor Abdur Rouf Talukder specifically asked the NBFIs to regain customer confidence through improvements of their financial health.

It is informed that the central bank chief also asked the NBFIs to file cases against defaulters and closely monitor bad loans to boost chances of recovery.