Bangladesh Bank has decided to dissolve the boards of five failed non-bank financial institutions (NBFIs) and place them under administrators, marking the first formal step towards their liquidation after years of financial deterioration and failure to repay depositors.
The decision was taken at a meeting of the central bank’s board of directors on Tuesday, chaired by Governor Md Mostaqur Rahman at Bangladesh Bank headquarters.
The board also granted four other troubled NBFIs a final three-month window to demonstrate their ability to recover and repay depositors. If they fail to do so, they too will be brought under the resolution and liquidation framework.
Officials said the five institutions selected for liquidation are FAS Finance and Investment, Fareast Finance and Investment, Aviva Finance, Peoples Leasing and Financial Services, and International Leasing and Financial Services.
A Bangladesh Bank official told TIMES that nearly Tk2,700 crore belonging to about 27,000 individual depositors remains trapped in these five institutions.
“Our first task is to remove the existing boards. Administrators will then be appointed in a manner similar to the process followed in the merged banks. Once the administrators take charge, the repayment process for depositors will begin,” he said.
According to the current plan, each individual depositor will be eligible to receive up to Tk10 lakh. The official, however, said further procedural steps are required before the repayment mechanism is formally launched.
The four institutions granted additional time are Bangladesh Industrial Finance Company (BIFC), Premier Leasing and Finance, GSP Finance Company and Prime Finance and Investment.
Bangladesh Bank officials said these institutions must demonstrate within three months that they can repay the principal amounts owed to individual depositors. Failure to do so will trigger resolution proceedings similar to those initiated against the five institutions selected for liquidation.
The latest decision follows a lengthy review process that began in May last year when Bangladesh Bank issued notices asking 20 weak NBFIs to explain why they should not be shut down. After a series of assessments, nine institutions were identified as critically distressed and shortlisted for closure. The list was subsequently narrowed, first to six and finally to five institutions.
Bangladesh Bank data show that the selected institutions have some of the highest default loan ratios in the financial sector. At the end of December, non-performing loans accounted for 99.99 percent of total loans at FAS Finance, 99.44 percent at International Leasing, 98.50 percent at Fareast Finance, about 95 percent at Peoples Leasing and 93.93 percent at Aviva Finance.
Industry insiders say years of weak governance, politically influenced lending, related-party transactions and large-scale financial fraud pushed many NBFIs into collapse.
For thousands of depositors who have been unable to access their savings for years, the move could mark the beginning of a long-awaited recovery process.
