Bangladesh Bank is working to liquidate 9 Non-Bank Financial Institutions (NBFIs) within this year, considering their assets quality.
This move to liquidate nine of the country's 35 NBFIs, a move officials say is aimed at protecting depositors and stabilising the troubled financial sector.
This marks the first time in the nation's history that such a drastic step is going to be taken.
Bangladesh Bank Governor Ahsan H. Mansur, at an event on Wednesday, told reporters that the government has given its in-principle approval for the process.
"We are moving forward with this process solely to protect the interests of the depositors. Ensuring their money is returned will be our first priority," he added.
The decision comes as the country's financial sector faces significant challenges, including a sharp rise in bad assets that has also necessitated the merger of several ailing banks. This unprecedented action underscores the deep-seated instability and long-term mismanagement within the NBFI sector.
Masrur Reaz, chairman of Policy Exchange, Bangladesh, and a former World Bank economist, told UNB that while the initiative is undoubtedly a "big blow" to the financial sector but there are limited alternatives.
"Considering asset quality, the central bank is taking the right decision," he said, adding that the move could be a catalyst for future reform.
Bangladesh Bank revealed that by the end of last year, a staggering 73.5 percent of the sector's total defaulted loans were concentrated in just 12 NBFIs. Of these, 20 institutions were initially placed in a "red category."
After seeking explanations from these firms in January, the central bank found the responses from nine of them unsatisfactory, leading to the decision to liquidate.
The nine institutions slated for liquidation have been identified as: First Finance, Bangladesh Industrial Finance Company (BIFC), Premier Leasing, Fareast Finance, GSP Finance, Prime Finance, Aviva Finance, People's Leasing, and International Leasing. These companies have been struggling with defaulted loans and financial irregularities for an extended period.
Bangladesh Bank data revealed that the total defaulted loans in the NBFI sector amounted to Tk 25,089 crore at the end of 2024. The nine institutions identified for liquidation alone account for more than half, or nearly 52 percent, of this total defaulted amount.
Analysts are calling the decision a "watershed moment" for Bangladesh's financial sector. They believe that the liquidation of these nine NBFIs could not only mark the collapse of distressed institutions but also signal the beginning of a major restructuring for the entire sector.
Comments