Non-bank financial institutions (NBFIs) in the country are grappling with an alarming rise in defaulted loans, reaching a record 36% of total disbursed loans by September 2024. The sector now holds Tk 26,163 crore in bad loans out of a total of Tk 73,663 crore, reflecting deep-rooted challenges stemming from irregularities and mismanagement in previous years stated in a report.
The current state of NBFIs highlights legacy issues from widespread scams that unfolded nearly a decade ago. Several institutions, including People’s Leasing, International Leasing, FAS Finance, and Bangladesh Industrial Finance Company Limited (BIFC), have been severely affected, with over 90% of their loans turning bad.
Industry experts attribute the crisis to inadequate oversight, unsecured loan disbursements, and infiltration by unethical individuals exploiting their positions for personal gain. This has left many NBFIs on the brink of collapse, threatening the stability of the financial sector.
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Defaulted loans in the sector have surged by 21% year-on-year, indicating both the long-standing impact of earlier malpractices and the strain of current macroeconomic challenges on businesses.
The central bank has been urged to engage with stakeholders to address the crisis and implement stronger regulatory measures. However, the concentration of bad loans among 12 out of 35 finance companies raises concerns about systemic vulnerabilities that require immediate attention to restore trust and integrity in the sector.
With some institutions reporting default rates as high as 99%, the survival of several NBFIs hinges on decisive action and reforms to prevent further financial deterioration.
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