Bangladesh Bank to Liquidate Six Ailing NBFIs

Bangladesh Bank to Liquidate Six Ailing NBFIs

The Bangladesh Bank has delivered a decisive blow to the country’s fractured non-bank financial sector, formalising a plan to liquidate six Non-Bank Financial Institutions (NBFIs) crippled by systemic corruption and gross mismanagement. Following a high-level board meeting on 27 January, the regulator confirmed that these entities have reached a point of "unviability," characterised by an utter failure to return depositor funds and astronomical capital shortfalls.

While six firms face immediate dissolution, the central bank has extended a cautious olive branch to three others: Bangladesh Industrial Finance Company (BIFC), GSP Finance, and Prime Finance and Investment. These institutions have been granted a three-month reprieve to mobilise fresh capital and demonstrate a significant recovery of defaulted loans. Should they fail to meet these stringent performance benchmarks by the end of the quarter, they too will be ushered into the liquidation process.

A Sector Divided

The gulf between the healthy and the "distressed" segments of the industry is staggering. Out of 35 NBFIs currently operating in Bangladesh, the central bank has identified 20 as being in a state of acute distress. These 20 firms hold a combined loan portfolio of Tk25,808 crore, of which a staggering 83.16%—roughly Tk21,462 crore—is now classified as defaulted.

Perhaps most alarming for the regulator is the collateral deficit; the assets backing these toxic loans are valued at a mere Tk6,899 crore, leaving a massive shortfall that threatens the broader financial ecosystem.

The Liquidation List: A Financial Post-Mortem

The institutions earmarked for liquidation represent some of the most profound failures in the history of the Bangladeshi financial sector. FAS Finance leads the list of casualties with a near-total collapse, reporting a defaulted loan ratio of 99.93%. International Leasing and People’s Leasing have also posted catastrophic losses, collectively haemorrhaging over Tk8,800 crore.

Safeguarding the Future

To manage this transition, the Bangladesh Bank intends to appoint administrators to oversee the winding-down process. There is a pressing need to protect individual depositors, who hold approximately Tk4,971 crore across these troubled firms. The central bank has signaled that initial liquidity injections may be required to facilitate the restructuring.

In a bid to maintain industrial peace, the regulator has also assured employees of the liquidating firms that they will receive their full severance benefits in accordance with established service rules. For the remaining 15 "healthy" NBFIs—which boast a modest non-performing loan ratio of 7.31% and a capital surplus of Tk6,189 crore—this purge is seen as a necessary, albeit painful, step toward restoring public confidence in the financial markets.