Staff Reporter :
The country’s non-bank financial institutions (NBFIs) have experienced a notable decline in deposits during the first quarter of this year.
According to a report by the central bank, deposits in NBFIs fell by Tk525 crore in the March quarter, a 1.37% decrease from the previous quarter, leaving the total deposits at Tk44,305 crore.
A senior central bank official attributed the decline primarily to a significant reduction in fixed deposits, which decreased by Tk597 crore over the three months.
This drop comes amidst a backdrop where deposits in the banking sector are growing at a rate of 9-10%, highlighting a stark contrast between the two sectors.
The official explained that previous irregularities in the NBFI sector have led to a loss of confidence among depositors.
Several NBFIs have struggled with high amounts of classified loans, resulting in their inability to repay customers’ deposits.
This situation has deterred many potential depositors from considering NBFIs as a viable option for their savings.
Despite these challenges, some NBFIs continue to perform well. However, the current inflationary environment is also affecting their ability to attract deposits.
Md Kyser Hamid, managing director and CEO of Bangladesh Finance and Investment Company Limited (BD Finance), emphasized that the lack of trust in NBFIs is a longstanding issue.
Hamid pointed out that the central bank’s cap on the maximum interest rate that NBFIs can offer, set at 12.55%, limits their competitiveness.
In comparison, many banks are offering interest rates up to 13%, and government Treasury bills and bonds provide returns up to 12%, making these alternatives more attractive to depositors.
Additionally, inflation has prompted many small depositors to withdraw their funds from NBFIs, exacerbating the decline in deposits.
The central bank report revealed that 3,880 accounts were closed in the first quarter of this year, leaving 4.27 lakh individual and institutional accounts in the NBFI sector by the end of March.
Interestingly, despite the reduction in deposits, the NBFI sector has seen an increase in loans. Outstanding loans in this sector rose to Tk74,529 crore in March, marking a 1.04% increase, or Tk770 crore, from the December quarter.
However, the sector continues to grapple with a high rate of default loans. Central bank data shows that 17 out of 35 financial institutions have default loan rates exceeding 50%, with total defaulted loans amounting to Tk21,658 crore.
The 17 worst-performing institutions account for Tk17,464 crore of these defaulted loans.