The Bangladesh Bank has granted preliminary approval for the liquidation of five non-bank financial institutions (NBFIs), marking a significant move aimed at addressing deep-rooted instability in the country’s financial sector. The decision was taken at a recent meeting of the central bank’s board of directors, chaired by the Governor.
According to officials, the liquidation process is expected to begin formally in July, subject to the allocation of necessary funds in the upcoming national budget. The move comes amid prolonged financial distress in the sector, characterised by soaring non-performing loans (NPLs), governance failures, and repeated inability to repay depositors.
The institutions identified for liquidation are FAS Finance, Fareast Finance, Aviva Finance, Peoples Leasing, and International Leasing. Collectively, these entities have been struggling for years with liquidity shortages and near-total loan default rates, rendering their operations effectively non-functional.
Central bank officials noted that there is no viable alternative left, given the sustained failure of these institutions to recover loans or meet their obligations to depositors. As part of the liquidation framework, each institution will be placed under the supervision of an appointed administrator, supported by two additional officials. These teams will oversee asset recovery, liability settlement, and the phased repayment of depositor funds.
The Bangladesh Bank estimates that approximately Tk 50 billion will be required solely to repay individual depositors. The government has reportedly assured that this amount will be earmarked in the next fiscal budget, enabling the liquidation process to proceed.
Non-Performing Loan Status of Affected Institutions
| Institution Name | Non-Performing Loan Ratio |
|---|---|
| FAS Finance | 99.99% |
| Fareast Finance | 98.50% |
| Aviva Finance | 93.93% |
| Peoples Leasing | Around 95% |
| International Leasing | 99.44% |
The figures highlight an alarming reality: these institutions are virtually overwhelmed by defaulted loans, with recovery prospects remaining extremely limited.
Financial sector experts attribute this collapse to years of weak governance, regulatory lapses, and large-scale loan embezzlement by influential borrower groups. They argue that earlier periods of inadequate oversight allowed significant financial irregularities to go unchecked, severely damaging institutional balance sheets.
One of the most widely cited cases involves allegations against PK Halder, who is accused of siphoning off thousands of crores of taka from multiple financial institutions, including Peoples Leasing, International Leasing, FAS Finance, and Bangladesh Industrial Finance Company. The unrecovered funds have been a major factor behind the current insolvency crisis.
In recent years, Bangladesh Bank has intensified its scrutiny of the sector, initially identifying around twenty weak NBFIs for possible restructuring or closure. Following detailed assessments, several institutions were removed from the list, while the five now selected have been deemed beyond recovery.
Economists suggest that while the liquidation process will be complex and time-consuming, it represents a crucial step towards restoring discipline in the financial sector. They also note that it could help restore some confidence among depositors, many of whom have had their funds locked for years, although full repayment is expected to take considerable time.