The crisis of non-bank financial institutions (NBFIs) has deepened, as their collective defaulted loans surged by Tk 31.44 billion in the first half of this year, reaching Tk 247.11 billion by the end of June.
The institutions that were already reeling from financial scams of Prashant Kumar (PK) Halder have registered the highest non-performing loans (NPLs) during the period. Their poor condition also affected the institutions related to them.
According to the Bangladesh Bank data, defaulted loans constituted 33.15 per cent of total loans in NBFIs as of June. It indicates a significant increase from December 2023, when defaulted loans were Tk 215.67 billion, or 29.27 per cent of total loans. The volume of non-performing loans surged by Tk 31.44 billion throughout the following six months. .
The situation is even worse in the banking sector, where non-performing loans increased by a staggering Tk 660 billion during the same period. Bank officials attributed the higher ratio of defaulted loans in the banking system to lack of regulatory surveillance.
The NBFIs have been under close regulatory scrutiny for the past three years, while the authorities began stricter supervision on banks following the fall of the Awami League government.
Loan disbursements in NBFIs did not go up significantly due to fund shortage. Their total outstanding loans stood at Tk 745.34 billion at the end of June, up from Tk 736.83 billion in December 2023 and Tk 704.36 billion at the end of 2022.
Throughout the past 18 months, total loans in the sector have increased by Tk 40.98 billion, while defaulted loans have grown by nearly double the amount, rising by Tk 78.90 billion.
The NBFIs have long been struggling in absence of proper supervision. The situation went downhill in 2019 when the authorities took an initiative to liquidate People’s Leasing due to its inability to repay the depositors.
Meanwhile, widespread fraud at institutions grabbed by PK Halder, such as Bangladesh Industrial Finance Company (BIFC), International Leasing, FAS Finance, and Aviva Finance, came to light and further eroded public confidence.
Against the backdrop, the regulator introduced strict actions in different ways to restore trust in the sector.
As of June this year, the Bangladesh Bank reported that bad loans in the financial sector amounted to Tk 210.33 billion, which is 28.22 per cent of total disbursed loans. The amount of bad loans was Tk 200 billion in March, which was 26.91 per cent of total loans.
Among the financial institutions linked to PK Halder, People's Leasing has the highest default rate, with 99 per cent of its loans or Tk 10.96 billion classified as defaulted. The situation in other institutions is also quite similar, with International Leasing reporting a default rate of 94.76 per cent or Tk 39.12 billion, FAS Finance at 89.56 per cent or Tk 16.45 billion, and Aviva Finance at 71.72 per cent or Tk 19.02 billion.
Apart from them, Fareast Finance posted a default rate of 94.41 per cent, GSP Finance at 92.37 per cent, Premier Leasing at 66.74 per cent, CVC Finance at 59.39 per cent, Meridian Finance at 59.17 per cent, IIDFC at 58.64 per cent, Hajj Finance at 57.82 per cent, Phoenix Finance at 57.79 per cent, National Finance at 56.86 per cent, Bay Leasing at 52.82 per cent, and Uttara Finance at 50.48 per cent.
As the first NBFI, IPDC Finance began its journey in 1981. Currently, there are 35 financial institutions in the country.