Some non-bank financial institutions are now on the verge of death. They have not been able to return depositors’ money for a long time.
They are not getting new deposits either. A large part of the loans given at different times have become non-performing. As of last September, 75 to 99 percent of the loans distributed by 11 out of the total 35 financial institutions in the country are defaulters. Of these, five institutions have more than 95 percent of defaulted loans.
And half or more of the total loans are defaulted by 22 institutions. In total, about 36 percent of the total loans of financial institutions have become defaulters. The Bangladesh Bank report has revealed such a dire situation.
Unbelievable but true, out of FAS Finance’s 1,822 crore taka loans, only Tk1,820 crore is now defaulted. This means that 99.92 percent of the institution has become defaulted. Similarly, 98.06 percent of Fareast Finance’s Tk 8.90 billion loans have become defaulted.
Of BIFC’s 773 crore taka loans, 97.27 percent have defaulted. Of People’s Leasing’s Tk 1,580 crore loans, 97 percent are now defaulted. Of International Leasing’s Tk 4,135 crore loans, 96.19 percent, or Tk3,977 crore, have defaulted. Of Union Capital’s Tk1,197 crore loans, 94.60 percent are now defaulted.
Of Aviva Finance’s Tk2,928 crore loans, 89.81 percent are defaulted. Phoenix Finance’s defaulted loans are 88.57 percent. First Finance’s 87.82 percent, Prime Finance’s 77.62 percent, and Premier Leasing’s 75.20 percent are now defaulted.
Of IIDFC, which has half or more of its total loans in default, 66.74 percent have defaulted. Bay Leasing has 65.89 percent, National Finance has 63.03 percent, CVC Finance has 59.54 percent, GSP Finance has 58.24 percent, Meridian Finance has 57.69 percent and Uttara Finance has 56.36 percent.
An official of Bangladesh Bank told Daily Industry that the net income of these institutions is nothing. They survive on what is being collected from loans, by paying salaries and allowances. They are eating up deposits. He believes that this plight of these institutions is due to extreme irregularities and mismanagement in collusion with various parties. A decision should be taken about the institutions quickly.
According to Bangladesh Bank, there are about 13 financial institutions whose defaulted loans are comparatively low. Due to which, out of the total loans of Tk73,663 crore in this sector till last September, Tk26,163 crore has become defaulted. Which is 35.52 percent of the total loans. Three months ago, at the end of June, defaulted loans were Tk 24,711 crore. And at the end of December last year, defaulted loans were Tk 21,567 crore, which is 29.27 percent of the loans disbursed till that time. This means that defaulted loans have increased by Tk 1,425 crore in the last three months. And in 9 months, it has increased by Tk 4,569 crore. A review of Bangladesh Bank data shows that many financial institutions are now not getting deposits even at high interest rates. Last November, financial institutions took deposits at an average interest rate of 10.43 percent. And the average interest rate on loans was 13.67 percent. Even then, they are not getting deposits as expected. As a result, new loans are not being disbursed. Most of the institutions are somehow surviving. As of last September, the amount of deposits of these institutions has decreased to Tk 47,838 crore. At the end of June last year, it was Tk 47,906 crore. And at the end of December last year, it was Tk 47,491 crore. Similarly, the loan balance has decreased to Tk 73,663 crore at the end of last September. Three months ago, it was Tk 74,534 crore. And at the end of last December, it was Tk 73,759 crore. The deposit and loan balance is calculated by adding the quarterly interest of the financial institution. As a result, the net loan and deposit have decreased much more.
When asked about the reason for the plight of the financial institution sector, prominent banker and chairman of the restructured board of directors of Global Islami Bank, Mohammad Nurul Amin, told Daily Industry that there was a different purpose in establishing financial institutions after banks. However, financial institutions are also running after the same customers with products like banks. However, these institutions have lagged behind because they do not have the skills and capabilities of banks. Again, whether there is a need for 35 financial institutions after so many banks in Bangladesh has not been reviewed. Approval of financial institutions was given a few days ago due to political considerations. His recommendation is that the central bank should make an arrangement for these institutions by providing Tk 5,000 to Tk6,000 crore.
Those concerned said that although there was extreme chaos in the financial institution sector, it was hidden for a long time. In most cases, these institutions became the basis for the division of ownership between the parties involved. In 2019, Prashant Kumar Halder, former MD of Global Islami and Aviva Finance, which was controlled by S Alam, opened a fake company and took control of FAS Finance, BIFC, People’s Leasing and International Leasing. At one point, these institutions were unable to return the depositors’ money. Due to this, the central bank took the initiative to liquidate some institutions including People’s Leasing and BIFC. However, it was not effective. According to Bangladesh Bank data, like financial institutions, defaulted loans have increased in the banking sector. In the first 9 months of this year, defaulted loans in the banking sector have almost doubled. At the end of last September, the amount of defaulted loans stood at Tk 2,84,977 crore, which is about 17 percent of the total loans. In last December, Tk 1,45,633 crore or 9 percent were defaulted.
The defaulted loans are increasing as loans taken under various unethical influences during the Awami League government started defaulting, said the concerned people. The IMF has set conditions for banks to reduce defaulted loans. In this regard, it has been asked to reduce them to 5 percent of the total loans and 10 percent of government banks by December next year.
