Six non-bank financial institutions (NBFIs) are in serious crisis with defaulted loans of Tk 6,916.62 crore due to widespread irregularities and corruption of relevant managements and officials, according to the Bangladesh Bank.
The central bank’s CAMELS rating, released at the end of June this year, found the amount to be 66.96% of the industry’s total defaulted loans.
The total default loans of the country’s 34 non-bank financial institutions stand at Tk 10,328 crore, or 15.39 percent of loans disbursed, according to the report.
The six institutions include Bangladesh Industrial Finance Company (BIFC), Fareast Finance and Investment Limited, FAS Finance and Investment, First Finance Ltd, International Leasing and Financial Services, and Premier Leasing and Finance.
There are allegations that the management and officials of these ETFs were involved in disbursing huge amounts of loans to various counterfeit companies with forged documents.
Bangladesh Industrial Finance Corporation
The Bangladesh Industrial Finance Company (BIFC) is one of six NBFIs heavily loaded with default lending. The company has disbursed Tk 814.04 crore in the form of a loan until June of this year, of which Tk 774.12 crore or more than 95% in default. However, the Tk772 crore of the default loan is uncollectible as most corporate borrowers only exist on paper.
According to sources, several companies, including the Sunman group owned by Major (retired) Abdul Mannan, former president of the BIFC, are among the institution’s main defaults.
Earlier this year, Abdul Mannan and his wife were questioned by the central bank’s commission of inquiry on allegations of irregularities.
Yesterday, BIFC Director General AKM Ashfaqur Rahman Chowdhury did not respond to repeated phone calls.
Fareast Finance and Investment
A recent central bank inspection revealed massive irregularities from Fareast Finance and Investment Ltd, a listed non-bank financial institution. The company has not been able to pay dividends to its shareholders since 2017.
Up to June of this year, the company has disbursed Tk 954.73 crore in the form of a loan. Of this total, Tk475.67 crore or 49.82% is the default. The amount of bad or bad loans is Tk 171 crore. In addition, the company has a provision shortfall of Tk 10.60 crore.
According to the central bank inspection, the company disbursed loans to its subsidiaries and other companies breaking banking rules and falsifying documents. Widespread irregularities were also noted in the company’s audit report on irregular expenditure and loan write-offs.
MA Khaleque, former chairman of Fareast Finance, Shantanu Saha, former managing director, Mohammad Hafizur Rahman, former deputy managing director and Md Rafiqul Islam, former independent director of the company, were involved in these irregularities, the team found. central bank.
According to the central bank report, Fareast Finance loaned Tk 117 crore to its subsidiary Fareast Stocks and Bonds, in violation of the prescribed loan limit.
In accordance with the policy of the Bangladesh Bank, no non-bank financial institution can approve a loan of more than 30% of its paid-up capital and reserves. However, subject to central bank approval, it is possible to increase the credit limit. But in this case, the management and board of FFIL broke the rules.
According to the BB report, Fareast Finance loaned Tk5 crore to Westmont Power and Tk2 crore to SKM Trading Center without proper documentation.
He also loaned around Tk 50 crore to three companies of the notorious Proshanta Kumar Halder (PK Halder) which is now considered uncollectible.
FAS Finance et Investissement SA
Another financial institution operated by PK Halder is FAS Finance and Investment Limited.
Until June of this year it has disbursed 1,933 Tk crore, of which 1,723.29 Tk crore, or about 90% default loans, of which 1,680 Tk crore uncollectible. The company has a provision deficit of Tk 305.66 crore.
There are allegations that the institution’s management committee distributed several anonymous loans. Russell Shahriar, the former chief executive of the company, approved the Tk700 crore with a single signature without any mortgages.
He confessed during questioning by the Anti-Corruption Commission (ACC) into FAS Finance’s Tk 1,300 crore embezzlement that PK Halder was the mastermind behind the corruption.
First Finance Ltd
First Finance Ltd has not paid any cash dividends to its investors for the past seven years. The company was listed on the stock exchange in 2003 and has long been in Category Z.
According to the Bangladesh Bank, the company has disbursed Tk 882.38 crore until June of this year, of which the amount of overdue loans is Tk 276.79 crore. Also, there are bad or bad Tk245 crore loans. At the same time, the company has a provision shortfall of Tk 46.14 crore.
The company’s total loss was Tk 36.35 crore through June 2021.
International leasing and financial services
International Leasing is one of the country’s red zone NBFIs with a total loan of Tk 3,929 crore, including a default of Tk 2,900 crore, or 73.79% of the total amount. In addition, the bad loan amount is Tk 2,567 crore.
The institution disbursed most of the default loans to bogus companies. On November 14, the Anti-Corruption Commission (ACC) approved seven cases concerning the embezzlement of Tk 320 crore from International Leasing.
According to ACC sources, some officials of the institution and members of the board of directors directly collaborated in granting loans to its owners by fabricating false documents.
So far, 15 cases have been filed against the institution accusing 37 officials of irregularities.
Premier Leasing and Finance Limited
Premier Leasing has a default loan of Tk 766 crore, or about 58% of the total loan disbursed by the institution.
He also has a deposit of Tk 194 crore in BASIC bank and five financial institutions that he will not be able to recover for a long time.
According to the Bangladesh Bank, the institution did not follow the appropriate lending policies in the disbursement of the loans.
Former Bangladesh Bank Governor Dr Salehuddin Ahmed said many NBFIs have been operating with a fragile structure from the very beginning. In addition, central bank supervision for NBFIs has not been as serious as in the case of banks, he said, analyzing the reasons for the poor performance of many non-bank financial companies. “Now the central bank has to work hard to get this sector back in order,” he said.