BB instructs non

Bangladesh Bank has instructed non-bank financial institutions (NBFIs) to reduce the amount of non-performing loans (NPLs) they have to resolve the sector's image crisis.

The country's 35 NBFIs had NPLs amounting to Tk 17,855 crore at the end of March, which is 25 percent of the loans they had disbursed, as per the central bank's latest data.

The instruction came at a meeting between the central bank and the Bangladesh Leasing and Finance Companies Association (BLFCA), a forum of chief executives of the NBFIs, at the BB headquarters yesterday.

Presiding over the meeting, Bangladesh Bank Governor Abdur Rouf Talukder specifically asked the NBFIs to regain customer confidence through improvements of their financial health, said a senior BB official who was present at the meeting.

The BB will closely monitor the situation, with the governor meeting the chief executives every three months from now on, said the BB official.

"The central bank chief asked the NBFIs to file cases against defaulters and closely monitor bad loans to boost chances of recovery," Md Mezbaul Haque, Bangladesh Bank executive director and spokesperson, told The Daily Star.

The NBFIs have been instructed to pay back depositors' money to restore the sector's image, he said, adding that a few companies have been struggling to do so.

Bangladesh Bank's financial stability report-2022 said 14 NBFIs were in the red zone last year as per a stress test report.

Contacted, Md Golam Sarwar Bhuiyan, chairman of the BLFCA, said the governor laid emphasis on loan recovery and corporate governance.

The banking regulator assured providing policy support for corporate governance, he said.

"BB governor also ensured providing support if we faced any undue pressure to establish corporate governance," said Bhuiyan, also managing director of the Industrial and Infrastructure Development Finance Company Ltd.

For 16 of the NBFIs, the NPL to outstanding loan ratio is over 30 percent, as per the BB data. Even more alarming is the fact that six out of the 16 had around 90 percent of their loans classified at the end of March 2023.