BB raises refund cap for depositors of 4 failing NBFIs to Tk50 lakh from Tk10 lakh
The Bangladesh Bank has prepared a scheme to repay individual depositors of four non-bank financial institutions (NBFIs) that are set to be liquidated.
Under the scheme, individual depositors will initially receive up to Tk50 lakh of their principal amount. To receive any amount above Tk50 lakh, a prescribed portion of the additional amount will be withheld.
The central bank had earlier said that depositors would receive a maximum of Tk10 lakh. However, it has revised the decision and introduced the new scheme to increase the amount payable to individual depositors.
The decision was taken at a meeting of the Bangladesh Bank board of directors on Thursday, chaired by Governor Md Mostaqur Rahman.
The four institutions are Aviva Finance, Fareast Finance, FAS Finance and International Leasing.
A Bangladesh Bank executive director told TBS that individual depositors of the four institutions will be repaid their principal in full up to Tk50 lakh. Those with larger deposits will be repaid after a certain amount is deducted from their principal.
Under the scheme, a depositor with between Tk50 lakh and Tk1 crore will get back a maximum of Tk80 lakh.
Depositors with between Tk1 crore and Tk1.5 crore will receive Tk80 lakh for the first Tk1 crore and 50% of the remainder.
Those with between Tk1.5 crore and Tk2 crore will receive Tk1.05 crore for the first Tk1.5 crore and 40% of the excess.
Depositors with Tk2 crore or more will receive Tk1.25 crore for the first Tk2 crore and 30% of the excess.
On 9 August, Bangladesh Bank dissolved the boards of the four institutions and declared their managing director posts vacant. It then appointed an administrator to each institution, along with two additional Bangladesh Bank officials to assist each administrator.
The non-performing loan ratio at the four institutions has reportedly risen from 93% to nearly 100%, which is why the move to shut them down was initiated.
The four institutions hold total deposits of Tk12,483 crore. Of this, International Leasing holds Tk3,012 crore, Aviva Finance Tk5,368 crore, FAS Finance Tk1,246 crore and Fareast Finance Tk449 crore.
In May last year, the central bank moved to cancel the licences of 20 NBFIs that had failed to return customers’ deposits. The institutions were sent letters asking why their licences should not be revoked.
Nine of the 20 were subsequently selected for closure in the first phase because their replies were unsatisfactory. In the final decision, however, five institutions were slated for closure. No final decision has yet been made on People’s Leasing because of legal complications surrounding the institution.
The remaining four institutions were given three months to turn around. If they fail to improve their condition within that period, they will also be shut down.
The four given time to recover are Prime Finance and Investment Limited, GSP Finance Company Limited, Bangladesh Industrial Finance Company Limited and Premier Leasing and Finance Limited.
