Over half of NBFIs on the brink
Muhid Hasan :
Despite a once-strong track record, Bangladesh’s non-bank financial institutions (NBFIs) have faced increasing fragility in recent years, as more than half of them now struggle with high levels of loan defaults and financial instability.
According to data from the Bangladesh Bank, non-performing loans (NPLs) in the non-banks rose to Tk27,189 crore by the end of March 2025, representing 35.32 per cent of total outstanding loans, which stood at Tk76,987 crore. In comparison, NPLs amounted to Tk25,089 crore, or 33.25 per cent of Tk75,450 crore in loans, in December 2024.
Over the course of one year, total loan outstandings in the sector increased by Tk2,598 crore, while defaults rose by a sharper Tk3,300 crore, pushing the NPL ratio up by 3.32 per centage points year-on-year.
Out of 35 NBFIs operating in the country, only around 20 per cent are considered financially stable. Alarmingly, 20 institutions have reported NPL ratios exceeding 50 per cent, with 7 of them facing default rates above 90 per cent. These distressed NBFIs have been categorised as “red” by the central bank due to their poor asset quality and loan exposure exceeding three times the value of their collateral.
At the end of December 2024, these 20 institutions collectively held Tk25,808 crore in outstanding loans, of which Tk21,462 crore – or a staggering 83.16 per cent – was classified as non-performing. The total collateral held against these loans was valued at only Tk6,899 crore.
Commenting on the issue, veteran economist and academic Professor Muinul Islam told The New Nation that the NBFI crisis is a consequence of broader instability within the banking sector, although public discourse has primarily focused on banks.
He further cautioned that the actual scale of non-performing loans in the NBFI sector may be understated. Professor Islam also warned against the use of public funds to resolve the crisis, suggesting instead that options such as mergers, restructuring, or strategic investments from both local and foreign sources should be explored as more sustainable alternatives to bailouts.
The Bangladesh Bank has identified between 15 and 20 NBFIs that are in critical condition and is preparing a potential liquidation strategy. Among the institutions on the central bank’s red list are: CVC Finance, Bay Leasing, Islamic Finance, Meridian Finance, GSP Finance, Hajj Finance, National Finance, IIDFC, Premier Leasing, Prime Finance, Uttara Finance, Aviva Finance, Phoenix Finance, People’s Leasing, First Finance, Union Capital, International Leasing, BIFC, Fareast Finance, and FAS Finance.
