Defaulted loans in the non-bank financial sector increased 32.3 percent or Tk 1,761 crore during the January-March quarter of the year 2019 amid massive irregularities in the sector that finally resulted in the liquidation of People’s Leasing and Financial Services.
The volume of defaulted loans in the NBI sector increased to Tk 7,221 crore at the end of March 2019, from Tk 5,460 crore in December 2018, according to Bangladesh Bank’s Financial Stability Assessment Report published on Sunday.
The ratio of classified loans and leases to total loans and leases rose to 10.3 percent at the end of March this year 2019 from 7.9 percent three months ago.
The volume of defaulted loans in the country’s NBFI sector has been swelling amid a series of scams and irregularities.
Massive irregularities in the People’s Leasing and Financial Services has finally resulted in the liquidation move by Bangladesh Bank.
As of December last year, People’s Leasing, established in November, 1997, has collected around Tk 2,000 crore — Tk 700 crore from individuals and Tk 1,300 crore from different banks and NBFIs.
Out of the entity’s Tk 1,131 crore disbursed loans, Tk 748 crore became defaulted, as per the BB information.
Of the defaulted loans, Tk 570 crore have been swindled by the entity’s directors. The High Court has already appointed interim liquidator for the liquidation of PLFS.
Besides, a mounting volume of defaulted loans in the Bangladesh Industrial Finance Company also prompted the central bank to seek finance ministry’s approval for the liquidation move.
The ministry, however, is yet to respond in this regard.
The financial situation of BIFC has worsened due mainly to non-payment of the Tk 639.65 crore outstanding loans received by its former chairman Major (retd) Abdul Mannan.
The amount of loans Mannan, a member of parliament and the secretary general of Bikalpa Dhara Bangladesh, an ally of ruling Awami League, received from BIFC accounted for around 76 percent of Tk 841 crore distributed by the entity in loans, as per the BIFC’s annual report for the year 2018.
Apart from the PLFS and BIFC, twelve other NBFIs were struggling to service as the BB stress test report showed that 13 entities out of 34 NBFIs were into the red zone while 17 into yellow and only 4 into the green zone.
The entities which were into the red zone also include Fareast Finance, First Finance, FAS Finance, International Leasing and Financial Services, Premier Leasing, Prime Finance, Reliance Finance and Union Capital.
Apart from the default loan issue of the NBFIs, the volume of non-performing loans in the banking sector increased to Tk 2.2 lakh crore at the end of March this year, of which 1.1 lakh crore were recoverable while Tk 30,000 crore were not recoverable and the recovery of loans amounting to Tk 80,000 crore was stalled by the courts.