Taking a firm stance against long-standing irregularities, poor management, and staggering default loans, Bangladesh Bank has decided to move forward with the liquidation of six non-bank financial institutions (NBFIs). Out of nine struggling firms initially under review, three have been granted a final grace period to stabilize their operations.
According to the decision made by the central bank, GSP Finance, Prime Finance, and Bangladesh Industrial Finance Company (BIFC) have been given three to six months to improve their financial indicators. Failure to show significant progress within this timeframe will result in these institutions also facing liquidation.
The decision was finalized during a Board of Directors meeting on Tuesday (January 27), chaired by Governor Ahsan H. Mansur. Executive Director and Spokesperson of the central bank, Arif Hossain Khan, confirmed the development following the meeting.
A History of Default and Decay
The move comes after 20 NBFIs were served show-cause notices in May last year for failing to return depositors' money and maintaining high levels of non-performing loans (NPLs). After reviewing the recovery plans of nine specific firms, the central bank found them unsatisfactory, leading to the liquidation list.
The institutions currently facing the liquidation process or strict observation include:
- FAS Finance
- Bangladesh Industrial Finance Company (BIFC)
- Premier Leasing
- Fareast Finance
- GSP Finance
- Prime Finance
- Aviva Finance
- Peoples Leasing
- International Leasing
Data from Bangladesh Bank reveals that due to years of mismanagement and weak oversight, default loan rates at these institutions have skyrocketed to between 75% and 98%.
The Shadow of Financial Scandals
Industry experts point to large-scale scams during the previous administration as the primary cause of this collapse. Notably, the infamous P.K. Halder is accused of embezzling at least 3,500 crore BDT from Peoples Leasing, International Leasing, FAS Finance, and BIFC, which effectively shattered their financial foundations.
Relief for Depositors
In a move to protect public interest, Governor Ahsan H. Mansur assured depositors that their funds would be returned. Speaking at a press conference, he announced that individual depositors will receive their principal amounts by February, ahead of the month of Ramadan.
Central bank officials noted that the government has verbally approved approximately 5,000 crore BDT to facilitate these repayments. However, it was clarified that depositors will only receive their original principal amount; no interest or profits will be paid.
