Bangladesh Bank has decided to close five weak non-bank financial institutions (NBFIs). To this end, administrators will be appointed at these firms on Sunday. On the day administrators are appointed, the firms’ current boards will be suspended and their managing directors’ (MDs’) contracts cancelled. The government has already given final approval to close the firms, sources said.
The five firms being closed are Peoples Leasing and Financial Services, International Leasing and Financial Services, Aviva Finance, FAS Finance and Investment, and FarEast Finance and Investment.
Sources said administrators would initially be appointed on Sunday at four of the firms, excluding Peoples Leasing, which has legal complications over cases; a court order on it has not yet been received, and an administrator will be placed there too once the order comes next week.
Last May, Bangladesh Bank moved to cancel the licences of 20 NBFIs that had failed to return depositors’ money, sending them letters asking why their licences should not be cancelled. Nine of the 20 were later selected for closure in the first phase, as their replies were unsatisfactory. In the final decision, five were closed and the other four given three months to turn around; if they cannot improve within that time, they too will be closed. The four given time to recover are Prime Finance and Investment Limited, GSP Finance Company (Bangladesh) Limited, Bangladesh Industrial Finance Company Limited (BIFC) and Premier Leasing and Finance Limited.
A senior central bank official said administrators would initially be appointed at four firms, but that all preparations had been completed for all nine. If the firms given three months fail to recover in that time, they will automatically come under the resolution process without any further intervention. Bangladesh Bank spokesman Arif Hossain Khan said the process of closing the firms was under way and administrators would be appointed soon, and that the legal complication over Peoples Leasing would also be settled quickly.
Bad loans near 100 percent
Bad loans at the five firms being closed have reached from 93 percent to almost 100 percent. At the end of last December, FAS Finance’s bad-loan ratio was 99.99 percent, FarEast Finance’s 98.50 percent, Aviva Finance’s 93.93 percent, Peoples Leasing’s about 95 percent and International Leasing’s 99.44 percent. Sector insiders say the bad loans rose so much because of widespread irregularities and financial scandals under the ousted Awami League government. For example, PK Halder, former MD of NRB Global Bank (now Global Islami Bank), faces allegations of embezzling at least 3,500 crore taka from Peoples Leasing, International Leasing, FAS Finance and BIFC.
Total deposits at the five firms being closed stand at 16,076 crore taka: 3,593 crore at Peoples Leasing, 3,012 crore at International Leasing, 5,368 crore at Aviva Finance, 1,246 crore at FAS Finance and 449 crore at FarEast Finance.
Individual depositors at these firms will be repaid on a priority basis, with each individual depositor getting up to 10 lakh taka. Individual deposits at the five firms are about 2,700 crore taka. Under current rules, when a bank or financial institution is wound up or closed, a depositor can get a maximum of 2 lakh taka from the deposit-insurance trust fund, however large their deposit, with the rest paid proportionally in a later phase from loan recovery or asset sales. But to bring order to the financial sector, depositors of these firms will be repaid up to 10 lakh taka by the government.
Total deposits at the four firms given time to recover stand at 2,402 crore taka: 635 crore at Prime Finance and Investment Limited, 260 crore at GSP Finance Company (Bangladesh) Limited, 540 crore at BIFC and 976 crore at Premier Leasing and Finance Limited.
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report