Government Guarantees Depositor Funds from NBFIs

In a significant move aimed at safeguarding small-scale investors, the government has announced that individual depositors of nine financially distressed non-bank financial institutions (NBFIs) will receive a full return of their principal, although no interest will be paid. This initiative forms part of a government-backed support package of BDT 5,000 crore, designed to expedite the liquidation process of the selected institutions. Bangladesh Bank Governor Ahsan Homanur confirmed that a clear distinction has been made between individual and institutional depositors.

Under the 2025 Bank Resolution Ordinance, the central bank has already initiated the liquidation process for the nine NBFIs, primarily due to rising default rates on loans and the overall financial deterioration of these institutions. While individual depositors will recover their full principal, institutional depositors will receive repayment only in proportion to the proceeds recovered from asset sales.

Governor Homanur emphasised, “Individual depositors will have their principal fully returned, but no interest will be provided. Institutional depositors will receive only the amount recoverable from asset sales.”

For each institution, Bangladesh Bank will appoint a liquidator responsible for evaluating assets, liabilities, loans, properties, and other investments. The proceeds will then be distributed proportionally among the eligible creditors. As Governor Homanur explained, “If a total liability of BDT 100 crore yields BDT 50 crore from asset sales, institutional depositors will receive BDT 50 crore.”

The nine NBFIs currently undergoing liquidation are as follows:

In January 2025, Bangladesh Bank identified a total of 20 NBFIs as financially vulnerable. Nine institutions were selected to mitigate risk while utilising the BDT 5,000 crore government support package.

Under the current deposit insurance scheme, individual depositors are protected up to BDT 2 lakh. The new ordinance extends this protection to NBFIs, with the government initially providing direct coverage. In the future, all NBFIs will be required to contribute to the deposit insurance fund to ensure uniform protection across banks and NBFIs.

Governor Homanur confirmed that the liquidation process has officially begun, with show-cause notices issued to the relevant institutions. If satisfactory explanations are not provided, the institutions will be formally declared bankrupt and liquidators appointed. Preliminary assessments by Bangladesh Bank indicate limited restructuring potential, implying restricted recovery prospects for institutional depositors.