The Board of Directors of Bangladesh Bank (BB) has given primary approval to the liquidation of five Non-Bank Financial Institutions (NBFIs) that are struggling with massive loan defaults and an inability to repay depositors.
The liquidation process for these institutions is expected to commence in July, according to sources privy to the decision made during a board meeting chaired by Governor Mostaqur Rahman on Tuesday.
The five institutions slated for liquidation are FAS Finance, Fareast Finance, Aviva Finance, People's Leasing and Financial Services, and International Leasing and Financial Services.
According to the central bank data, the non-performing loan (NPL) ratios of these institutions have reached critical levels, ranging from 93 percent to nearly 100 percent. Due to their prolonged failure to recover loans, they have been unable to honour withdrawal requests from depositors.
The central bank plans to shut down these entities under the Bank Resolution Act 2026. As part of the process, it will appoint one of its directors as an administrator for each institution, assisted by two additional officials. These institutions will eventually be declared defunct.
Central bank officials estimate that approximately Tk 5,000 crore will be required to return funds to individual depositors. The central bank reportedly moved forward with the liquidation decision after receiving positive assurances from the government regarding fund allocation in the upcoming national budget.
The Bank Resolution Act provides a framework for the merger, restructuring, or closure of financially distressed institutions and dictates how assets should be liquidated to pay off creditors.
The decision follows a lengthy review process. In May last year, the central bank issued show-cause notices to 20 NBFIs for high NPLs and failure to return deposits. Later, nine institutions with unsatisfactory recovery plans were earmarked for closure. That list was trimmed to six in January and finally to five, with Premier Leasing being excluded from the current final list.
The financial health of these entities, as of December last, paints a dire picture with FAS Finance having 99.99 percent NPL ratio, International Leasing 99.44 percent, Fareast Finance 98.50 percent, People's Leasing 95 percent and Aviva Finance 93.93 percent NPL ratio.
Industry insiders attribute this collapse to years of systemic irregularities, corruption, and massive loan scams. Notably, disgraced businessman PK Halder is accused of embezzling at least Tk 3,500 crore from four institutions: People's Leasing, International Leasing, FAS Finance, and BIFC.