16 NBFIs are in critical condition

Default loans stood at Tk 21,658 cr

Mahfuz Emran : About 30 percent of the loans disbursed in the non-bank financial institutions sector till September last year have already defaulted. Out of these 16 institutions are in very critical condition. 43 to 99 percent of the loans disbursed to these institutions default. This information has come up in the latest report of Bangladesh Bank.
But the sector concerned and experts say, this is not the real picture. Actual defaults are even higher, which bodes ill for the sector. Most of the institutions have reached the brink of collapse except for a few.
According to Bangladesh Bank’s updated report, the defaulted loans of 35 financial institutions increased by Tk 1,707 crore or 2 percent in the 3 months from July to September 2023. At the end of September, defaulted loans in this sector increased to Tk 21,658.15 crore, which is 29.75 percent of the disbursed loans. Loan disbursement was Tk 72,806 crores. Earlier, defaults in the financial institutions sector from April to June were Tk 19,951 crore, which is 27.65 percent of disbursed loans, and from January to March, defaults in the financial institutions sector were Tk 17,855 crore, which is 25 percent of disbursed loans.
The financial institutions with the highest default rate are People’s Leasing 99.02 percent, BIFC 96.85 percent, International Leasing 94.76 percent, First Finance 94.41 percent, GSP Finance 92.37 percent, FAS Finance 89.56 percent. percent, Premier Leasing 66.74 percent, CVC Finance 59.39 percent, Meridian Finance 59.17 percent, IIDFC 58.64 percent, Hodge Finance 57.79 percent, Phoenix Finance 57.77 percent, National Finance 56.86 percent, Bay Leasing 52.82 percent, Uttara Finance 50.82 percent and Union Capital 43.12 percent.
People related to the sector said that the irregularities that Prashant Kumar (PK) Halder, who is the most talked about person in the financial sector, has done in various financial institutions, the whole sector is now taking its toll. Some of the financial institutions owned by PK Halder have the highest default rates. Apart from this, the non-performing loans are also increasing in other financial institutions related to these financial institutions, due to which the overall non-performing loans are increasing in this sector.
Golam Sarwar Bhuiyan, chairman of Bangladesh Leasing and Finance Companies Association (BLFCA), said that some financial institutions have been in a very bad condition for a long time. Besides, due to Corona, the loan repayment period has been delayed by almost two years, which has increased the number of installments of many of the borrowers. Now many of those customers are defaulting. Because of this, defaulted loans have increased slightly. Besides, defaulted loans are on the rise even in March, June and September quarters. At the end of the year, it decreased slightly. Because, at the end of the year, various benefits are given.
According to the data of Bangladesh Bank, the debt status of financial institutions at the end of September 2023 was Tk 72,806.43 crore. However, at the end of last June, the total amount of disbursed loans was Tk 72,150 crores. In other words, the debt has increased by Tk 656 crores in three months. Three months before that, in March, the total debt was Tk 71,265 crores. Accordingly, the debt increased by Tk 885 crore in those 3 months. At the end of December last year, the amount of defaulted loans in financial institutions was Tk 16,821 crore, which increased to Tk 19,951 crore last June. In September it further increased to Tk 21,658.15 crore. According to that, in 9 months defaulted loans have increased by Tk 4,837 crores.
BLFCA’s former chairman and IPDC’s former managing director (MD) Mominul Islam said that there is a challenge in the entire economy. Besides, Bangladesh Bank has recently issued guidelines for financial institutions laws which are stricter than banks in many cases. As a result, financial institutions will do well in the long run, even if there are some immediate problems.
Regarding the possible policy merger of Bangladesh Bank, he said, a good institution would not want to shoulder the responsibility of irregularities. This is normal. No existing law provides for merger. But it seems that evils may have to be combined with one another.